Bob Owens visits airline analysts to argue labor's side of story

[TWU informer]

AA doesn't want to outsource and lose control of the overhaul.

Instead they just want to use this as a tool of fear and manipulation during negotiations.

 

[WorldTraveler]

This is certainly a rather damning quote and certainly settles the question of whether Boeing saved any money:

"We spent a lot more money in trying to recover than we ever would have spent if we'd tried to keep the key technologies closer to home," Albaugh told his large audience of students and faculty."

I appreciate the efforts at documenting Boeing's statements.

The Rolls-Royce explosion was certainly serious but Boeing doesn't plane aircraft engines so the problems with that situation couldn't have been solved by bringing the work back in house.

Historians will remember that the L1011 program nearly collapsed because of Rolls-Royce engines..... and more recently.....

I don't know how the 787 compares to the 380 in percent outsourced (beyond traditional norms for airliners) but the 380 also faced significant delays - and the 787 will likely become profitable at some point; it is doubtful the 380 ever will based on the number of orders received up to this point.

I don't think there will be any doubt that the 787 will be a case study for how NOT to do manufacturing.

But the point about whether Boeing made a mistake in outsourcing - and alot of us could have recogized they were going a bit too far - doesn't change the fact that American Airlines is not a manufacturer and it has peers who do successfully outsource and insource at lower costs and with fewer problems than AA has experienced.

The sad reality is that AA's costs for maintenance are the highest in the US network carrier segment and AA is facing the largest fine in aviation history for maintenance violations.

Continuing to hold onto "no outsourcing" as a banner under which the TWU can rally its members defies the norms of the airline industry and until the TWU and AA mgmt can figure out how to perform AA's maintenance in a cost effective manner, Wall Street isn't the least bit impressed by visits from AA labor leaders.

AMR is a business and the standard by which AA and AMR will be judged is the degree to which it succeeds or fails relative to its peers - , esp. network carriers - and other companies with whom AA must compete for investment.

 

[boston]

This is certainly a rather damning quote and certainly settles the question of whether Boeing saved any money:

"We spent a lot more money in trying to recover than we ever would have spent if we'd tried to keep the key technologies closer to home," Albaugh told his large audience of students and faculty."

I appreciate the efforts at documenting Boeing's statements.

The Rolls-Royce explosion was certainly serious but Boeing doesn't plane aircraft engines so the problems with that situation couldn't have been solved by bringing the work back in house.

Historians will remember that the L1011 program nearly collapsed because of Rolls-Royce engines..... and more recently.....

I don't know how the 787 compares to the 380 in percent outsourced (beyond traditional norms for airliners) but the 380 also faced significant delays - and the 787 will likely become profitable at some point; it is doubtful the 380 ever will based on the number of orders received up to this point.

I don't think there will be any doubt that the 787 will be a case study for how NOT to do manufacturing.

But the point about whether Boeing made a mistake in outsourcing - and alot of us could have recogized they were going a bit too far - doesn't change the fact that American Airlines is not a manufacturer and it has peers who do successfully outsource and insource at lower costs and with fewer problems than AA has experienced.

The sad reality is that AA's costs for maintenance are the highest in the US network carrier segment and AA is facing the largest fine in aviation history for maintenance violations.

Continuing to hold onto "no outsourcing" as a banner under which the TWU can rally its members defies the norms of the airline industry and until the TWU and AA mgmt can figure out how to perform AA's maintenance in a cost effective manner, Wall Street isn't the least bit impressed by visits from AA labor leaders.

AMR is a business and the standard by which AA and AMR will be judged is the degree to which it succeeds or fails relative to its peers - , esp. network carriers - and other companies with whom AA must compete for investment.

Who are you! You might want to call Arpey, and and give him you take on the situation and advise him there is no saving AA, and to give it up, and hand it over to DAL. The only solution, I've read from you is for the unions to give in and the corner strategy won't work because all the airlines are moving in on AA, oh wait at least AA deals with a union,unlike DAL...what are they scared of. Maybe they should be scared for the fact DAL couldn't get to far with out BK.

Posters on airliners.net have made no bones about the fact that DAL want's nothing to do with MIA, and that AF/KLM are calling the shots on the LAX-MIA, and MIA-LHR.

Word on the street is AA will begin to add more CA flying and begin SA along with more Pacific.

 

[limit]

[/quote]

except you really have no idea how much money, if any, Boeing is losing by subcontracting because they don't report it and any attempt by anyone to esimate is just a swag.

It's a nice theory but you have no idea what the original cost might have been or even Boeing could even have built the 787 on its own.

[/quote]

This is certainly a rather damning quote and certainly settles the question of whether Boeing saved any money:

"We spent a lot more money in trying to recover than we ever would have spent if we'd tried to keep the key technologies closer to home," Albaugh told his large audience of students and faculty."

I appreciate the efforts at documenting Boeing's statements.

The Rolls-Royce explosion was certainly serious but Boeing doesn't plane aircraft engines so the problems with that situation couldn't have been solved by bringing the work back in house.

Historians will remember that the L1011 program nearly collapsed because of Rolls-Royce engines..... and more recently.....

I don't know how the 787 compares to the 380 in percent outsourced (beyond traditional norms for airliners) but the 380 also faced significant delays - and the 787 will likely become profitable at some point; it is doubtful the 380 ever will based on the number of orders received up to this point.

I don't think there will be any doubt that the 787 will be a case study for how NOT to do manufacturing.

But the point about whether Boeing made a mistake in outsourcing - and alot of us could have recogized they were going a bit too far - doesn't change the fact that American Airlines is not a manufacturer and it has peers who do successfully outsource and insource at lower costs and with fewer problems than AA has experienced.

You appreciate the efforts? That's a classic.!!!!

Bud, your depth of intelligence on this particular subject seems to vary, depending on how far you stand in front of the mirror.
You do that a lot ,don't you?

 

[PhatSappy]

http://www.thestreet.com/_yahoo/story/11059087/1/american-labor-leaders-visit-analysts.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

Bob's wearing a suit - looks like management. Overall, nice article.

I am happy Bob wore a suit whilst representing me... ahem, "us". He's one of the good fellows.

 

[WorldTraveler]

Who are you! You might want to call Arpey, and and give him you take on the situation and advise him there is no saving AA, and to give it up, and hand it over to DAL. The only solution, I've read from you is for the unions to give in and the corner strategy won't work because all the airlines are moving in on AA, oh wait at least AA deals with a union,unlike DAL...what are they scared of. Maybe they should be scared for the fact DAL couldn't get to far with out BK.

Posters on airliners.net have made no bones about the fact that DAL want's nothing to do with MIA, and that AF/KLM are calling the shots on the LAX-MIA, and MIA-LHR.

Word on the street is AA will begin to add more CA flying and begin SA along with more Pacific.

I simply point out that while there are people here who continue to argue that AA can do nothing wrong and its employees will burn the place down if the company dares ask them for another penny, there are airlines that actually work.
If you want a unionized model, look at WN. They have unions and they have succeeded well.
If you want a model of an airline that is most like AA as a US network airline who had to significantly restructure, then DL provides the best example of the past 10 years. If you'd like to put another company on the table as an example that AA could follow, please do so and we can debate the merits of it.
But the bottom line is that there are companies that work and AA mgmt and labor had better figure out how to copy one of them - or write a story of their own - and turn AMR AAround.

If you think the concensus on a.net or any other airline chat board is indicative of what any airline is actually doing, then it is no wonder why understanding what is really going on in the industry is so hard for you to understand.

I don't know what DL is going to do in MIA or anywhere else... but for now they are competing with AA in some of its key markets such as JFK, LHR, LAX, and DCA - and they have done quite well in taking market share from AA in JFK and DCA. You need only look at what DL has done in JFK and BOS international to see that DL is indeed capable of competing against AA.

How is AA doing on bookings for the new route LAX-PVG? The one that AA announced and then UA jumped in on? Do you think DL had anything to do with that?

Word on this street was that AA was going to pick up a dozen or more of JAL's 773s - and that I believe has turned into 3 new bulid 773s. If AA can use those to build its presence across the Pacific and to JNB, go for it.. when the press releases come out, then we'll know it is happening.

 

[boston]

I simply point out that while there are people here who continue to argue that AA can do nothing wrong and its employees will burn the place down if the company dares ask them for another penny, there are airlines that actually work.
If you want a unionized model, look at WN. They have unions and they have succeeded well.
If you want a model of an airline that is most like AA as a US network airline who had to significantly restructure, then DL provides the best example of the past 10 years. If you'd like to put another company on the table as an example that AA could follow, please do so and we can debate the merits of it.
But the bottom line is that there are companies that work and AA mgmt and labor had better figure out how to copy one of them - or write a story of their own - and turn AMR AAround.

If you think the concensus on a.net or any other airline chat board is indicative of what any airline is actually doing, then it is no wonder why understanding what is really going on in the industry is so hard for you to understand.

I don't know what DL is going to do in MIA or anywhere else... but for now they are competing with AA in some of its key markets such as JFK, LHR, LAX, and DCA - and they have done quite well in taking market share from AA in JFK and DCA. You need only look at what DL has done in JFK and BOS international to see that DL is indeed capable of competing against AA.

How is AA doing on bookings for the new route LAX-PVG? The one that AA announced and then UA jumped in on? Do you think DL had anything to do with that?

Word on this street was that AA was going to pick up a dozen or more of JAL's 773s - and that I believe has turned into 3 new bulid 773s. If AA can use those to build its presence across the Pacific and to JNB, go for it.. when the press releases come out, then we'll know it is happening.

Not all the employee's are intent on burning the house down at AA, and APFA has negotiated and signed of on almost all items of the contract, that will be "productive" for all, but there is more work to be done. A.net, Airline pilot central and this forum are all different points of views out there. I'd expect other airlines to jump in as AA does, to compete. AA is adding and defending PAP,since DAL is now flying there, and CO will soon. JKF-PAP = 3, MIA-PAP=4, FLL-PAP=3, it's not huge but it's a total of 3 flight added, more flying is coming to all bases,. LAX-PVG, maybe should fold before it gets off the ground??

Maybe AA should of followed DAL, UAl in a low cost TED, SONG, and filed BK, and hocked up with another airline, just because AA doesn't do what others do, doesn't mean AA will fail.

AA employees want to defend their, crafts, and jobs and most realize we have many years invested hear and that, and want to see the company succeed and grow, but it's hard to make head way when it's a one way street.

Post's that have nothing redeeming about AA, wont work.

 

[WorldTraveler]

Not all the employee's are intent on burning the house down at AA, and APFA has negotiated and signed of on almost all items of the contract, that will be "productive" for all, but there is more work to be done. A.net, Airline pilot central and this forum are all different points of views out there. I'd expect other airlines to jump in as AiA does, to compete. AA is adding and defending PAP,since DAL is now flying there, and CO will soon. JKF-PAP = 3, MIA-PAP=4, FLL-PAP=3, it's not huge but it's a total of 3 flight added, more flying is coming to all bases,. LAX-PVG, maybe should fold before it gets off the ground??

Maybe AA should of followed DAL, UAl in a low cost TED, SONG, and filed BK, and hocked up with another airline, just because AA doesn't do what others do, doesn't mean AA will fail.

AA employees want to defend their, crafts, and jobs and most realize we have many years invested hear and that, and want to see the company succeed and grow, but it's hard to make head way when it's a one way street.

Post's that have nothing redeeming about AA, wont work.

I don't have any doubt that there are many, many good AA people on here who care very much about their jobs and their company - because I know a number of AA employees personally.
I also know full well that internet forums are not reflective of any group of people and there are many employees of all airlines that are discussed on this forum that do not participate in these forums.

What I find very scary is the number of people here - including AA's labor leaders - who simply do not understand or refuse to accept the realities of the industry, including the fact that AA is a much weaker competitor than it was years ago and because AA managed to survive previous crises doesn't mean it can at all in the future.

Other carriers, CO, DL, UA, and US included all made a number of strategic errors in the past. None of us are measured by the mistakes of our past but whether we were able to learn from them and where we are in life today.

It is highly possible that AA can turn things around and return to being a leader in the industry again... it was for many years.
But you and others need to be really honest in recognizing that AA has lost so much ground and has been so weakened by its competitors that there really is no example of an airline in the past returning to where AA needs to be without going through some very serious and painful changes.

I understand and support the whole concept of protecting workers in the USA and believe we as Americans do need to do what we can to provide jobs for Americans in America and limit the number of jobs that are sent overseas. But there is a time when you have to admit the problem is bigger than yourself and needs to be dealt with at a national, legislative level instead of just at a company by company level. I believe the labor unions in the United States have done a very poor job at convincing the American people of the value of protecting American jobs - and of getting their message heard in Washington.

I am happy to see you and others participate in discussions which involve opinions and beliefs - that is what a forum like this is about. But when facts are presented, they need to be accurate or they will be challenged. Some of the heat that has occurred here over the past week has been because some people have made statements that can or cannot be denied on the basis of fact when what they said was clearly not accurate.

If you or others want to discuss opinion, then it is apparent that there is no real basis for arguing whether that is accurate or not although there may be facts that are very much a part of how that opinion can be formed. An example of an opinion would be to say that "I don't expect AA's unions will ever agree to any paycut for its members." None of us can know with certainty if that statement will be true so it is opinion. However, there are clear facts that can be used to counter the statement that might be made "AA doesn't need any reductions in its labor costs to compete effectively" because there are clear industry accepted statistics that do show that AA's labor costs are the highest in the industry.

Here is a link to data which shows where AA's costs are relative to the rest of the industry.
http://www.airlinefinancials.com/uploads/Q3_2010_INDUSTRY_SUMMARY__parent_.pdf
The top of page 2 shows that AA's labor costs are more than 33% higher than DL and US's (LCC).
Total cost per available seat mile for AA is the highest among the major carriers (including low fare carriers that compete with network carriers) and AA is more than 15% higher than DL's a direct peer to AA.
The bottom of page 1 shows that AMR's margin is one of the lowest in the industry and DL's is the highest among network carriers.

I don't present any of this to beat anyone over the head but for people to realize that AA cannot continue to exist with these kinds of major structural disadvantages. If you or others can find an example of an airline that has survived long-term with these kinds of disadvantages, put it on the table and let's discuss it.

What I really DO want to happen is for people here to recognize that AA mgmt AND its labor leaders need to immediately begin attacking the roots of these problems if they want to have an American Airlines a few years from now.

AA's competitors have completed their restructuring efforts and are now poised to aggressively compete against each other and AA; AA's position of not having restructured at the same time as its competitors makes the work of restructuring that much more difficult - but every bit as necessary.

What should be very apparent is that there is no more time or room for accepting the status quo which has existed at AA and AMR for the last 8 years.

Hopefully you will be one of the people who will step up to the plate and make change happen.

 

[Frank Szabo]

... snip

Hopefully you will be one of the people who will step up to the plate and make change happen.

We "stepped up to the plate" in 2003 only to find we were lied to by both the company AND union, but that's what they do. I didn't believe the line of tripe then nor do I now. The workers have the least ability to make any change of consequence. All we can do is take concessions that will accomplish nothing but keeping pay high for executives. Never again.

In other words, they go first this time - THEIR concessions will be permanent this time.

 

[FWAAA]

We have no problems with "stepping up to the plate" - it will happen rapidly AFTER the company and THEIR union begin to honor their promises of 2003.

I'm a member of a union and one of the first things I learned (as I assume you did) is that the only promises employers make are written in the contract. Which contractual promises has AA broken?

Certainly the worthless union let you down. But AA has fulfilled every promise it made - you know, the enforcable ones in the contract. Feel-good corporate-speak buzzwords aren't promises.

 

[FrequentFlierCA]

Have to agree with FWAAA: have they not paid you what was agreed? Provided benefits? Even their spring stock payouts were agreed to by your unions.

So how has AA not fulfilled its contractual obligations?

 

[WorldTraveler]

We "stepped up to the plate" in 2003 only to find we were lied to by both the company AND union, but that's what they do. I didn't believe the line of tripe then nor do I now.

We have no problems with "stepping up to the plate" - it will happen rapidly AFTER the company and THEIR union begin to honor their promises of 2003.

In other words, they go first this time.

There is a limit to the amount of time that AA labor has to decide that the water coming into the ship will grow to a point that the vessel can no longer remain afloat... or to use the analogy I have used previously, the amount of blood lost will result in the body's inability for key systems to continue to operate.

I would suggest you and others think very hard about the implications for yourselves individually and collectively when key body systems can no longer function.

 

[DallasConehead]

Snip:

The top of page 2 shows that AA's labor costs are more than 33% higher than DL and US's (LCC).
Total cost per available seat mile for AA is the highest among the major carriers (including low fare carriers that compete with network carriers) and AA is more than 15% higher than DL's a direct peer to AA.
The bottom of page 1 shows that AMR's margin is one of the lowest in the industry and DL's is the highest among network carriers.

I don't present any of this to beat anyone over the head but for people to realize that AA cannot continue to exist with these kinds of major structural disadvantages. If you or others can find an example of an airline that has survived long-term with these kinds of disadvantages, put it on the table and let's discuss it.

Can anyone say with certainty the labor costs are the highest at AA because of organized labor? Can anyone say with certainty AA isn't "top heavy" with management and staffers causing the high costs? What’s more, if it is organized labor, which group is it that is getting too much when compared to peer legacy carriers?

Does someone have all the answers to these questions?

Just Asking....

 

[WorldTraveler]

Can anyone say with certainty the labor costs are the highest at AA because of organized labor? Can anyone say with certainty AA isn't "top heavy" with management and staffers causing the high costs? What’s more, if it is organized labor, which group is it that is getting too much when compared to peer legacy carriers?

Does someone have all the answers to these questions?

Just Asking....

good question and the answer is yes and no and outside of a few people in labor relations at each airline, no, no one knows all of the answers because.

1. pay rates and work rules are pretty well known either via contracts which are pretty much public information, seniority lists, and published scales for airlines like DL that are largely non-union.
2. airline flight schedules are highly public information as is the traffic they carry and the flights they fly which is reported both to the public and the SEC monthly and to the DOT on a more detailed but more delayed basis.
3. airlines also are required to report their employment information to the DOT and is broken down by certain categories - but which do not align fully with either usual airline work groups of unions... also this data can be released months or more after the end of the period it represents so it isn't necessarily very accurate.
4. airlines can exchange general information with each other of an employment nature and that likely is done....
5. airlines also file salary information with the DOT by workgroup but it too is delayed... but can also be calculated from contracts and published pay scales.

The most accurate data is the total ASM's flown and number of employees at each airline and that is reported on at least a yearly basis and often quarterly basis. The data which has been quoted on productivity by airline which shows AA at about a 20% productivity disadvantage compared to other airlines is calculated using this data - and is fairly accurate.

It is a lot harder to know w/ certainty which groups are driving the problem... but one thing is certain and that is that the excuse that AA does in-house overhauls is not even close to the whole reason. AA has almost 10K too many employees if it used the ratios of productivity that DL and UA have.

It is rather certain that most AA labor groups have less than average productivity but which ones are worse is hard to know w/ certainty using publicly available documents - which is part of why I have never tried to say that the problem lies with any one workgroup or union.

No, it is not because AA is unionized that AA is less productive. WN and NW are/were both as unionized if not more than AA and had much higher productivity. DL and NW had very similar levels of productivity and overall labor costs - so that while DL and NW came up w/ different salaries and benefits for each workgroup, the total was almost the same.

AA and UA both have historically been much less productive than what used to be the 2nd tier of the industry which was CO, DL, and NW. UA's productivity increased to levels comparable to the "2nd tier" after UA's bankruptcy and w/ DL's acquisition of NW and CO's acquisition of UA, the productivity standards of the 2nd tier are now the standards for the entire network industry; US has increased its productivity significantly as well and is at a similar level although US' network is more different from the other network carriers because of its lower percentage of int'l flying and its greater percentage of short haul domestic flights - which inherently makes US less productive in comparison.

As for too much supervision at AA, I'm sure that is true... but it also doesn't help that there are people on here and elsewhere who say that they aren't afraid to see AA go over the edge - and might push if given the opportunity - even if that is not the will of the vast majority of AA employees. It also can't be ruled out that AA is beefing up its supervisory ranks esp. in cities where there is the potential for greater unrest if AA pushes forward w/ initiatives which are clearly going to evoke a response from employees... but it should also be noted that AA's management and supervisory cost differences even based on the numbers that have been reported are nearly large enough to account for the lower productivity and higher labor costs at AA relative to other network carriers.

bottom line is that it is safe to assume that most AA labor groups are not as productive as their peers at other airlines and that productivity , not average pay, is the biggest driver of AA's labor cost problems.

 

[Birdman]

bottom line is that it is safe to assume that most AA labor groups are not as productive as their peers at other airlines and that productivity , not average pay, is the biggest driver of AA's labor cost problems.

Perhaps you could give specific advice on what could be done to improve productivity on each of the three work groups starting with..........the pilots.