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

[Bob Owens]

AA's AMTs have a wage rate that's among the lowest in the industry but there's two sides to that story. AA's line mechanics are very underpaid compared to UPS, FedEx and WN. AA's overhaul mechanics enjoy above-average pay compared to AMTs at stateside (domestic) MROs. As I've posted before, AA is probably not willing to pay its overhaul staff the same hourly pay that UPS, FedEX or even WN pays their line mechanics.

AA is not willing to pay anybody, we are going to have to make them.

Well what does SWA pay their OH mechs? The fact is they do have OH, so does Delta, UAL and USAIR and all those mechanics earn considerably more than MRO mechanics. The UAL TA has language to bring more work back in house, could be that they are tired of forking over 13% of their revenue for M&R services. IIRC the norm for all of M&R (labor, parts etc) was around 10%, so the 13% was in addition to what they were paying their own line mechs.

 

[WorldTraveler]

I'm suspicious why the compAAny would continue to use "stale data" in lieu of updated data that was more supportive of their agenda.




I'm only concerned with M&R. Show me where our productivity does not meet or exceed that of our competitors. BTW, outsourcing percentages will not be accepted without supporting data.




I fail to see any contract language at their disposal that would prevent manAAgement from wringing more productivity out of M&R. As Informer stated, the compAAny is in the process of hiring a plethora of new mechanics. You say that is the wrong approach, and I agree, but who's really in control?

Part of the reason the company is using stale data is because as I noted although airlines provide employment data to the DOT, it is late.... I haven't seen any analyst that uses anything more recent than 2009 data....

you may be focused on M&R but there are other parts of the equation and AA needs to solve them all.. the fact that no group is going to give before they know what others are going to makes it very difficult to solve TWU's contract w/o APA and APFA etc all agreeing to something at the same time.

AA's outsourcing percentages on the negotiations website seem reasonable to me.... AA is alot less than any other carrier but they do outsource some things.

A decent early out program would be a step in the right direction.

totally agree... I noted that in one of my recent posts... DL got rid of a lot of unhappy campers w/ multiple early out programs. I wouldn't be surprised if they offer another one if the IAM/AFA representation issues are resolved.... there are people that want out but I suspect they could not offer one on either side until the representation issues are resolved

Because the industry has changed so much the only real way to compare productivity at AMR would be to compare past to present. Even then the figures would be unfavorably distorted against labor due to increased insourcing and 3P work. That said AMR has seen a huge increase in productivity, and those figures are a much more reliable indicator of whats going on at AMR than figures from other carriers where they sent work out. Other carriers outsourced most of their OH, this cut heads and gave a false indication of a productivity increase because now the actual labor was done by vendors but the costs would not be marked as labor costs. Trying to gauge productivity at those carriers that simply decided to outsource is pretty much impossible. I saw a figure from UAL where 13% of their total operating costs was "Maintenance and realted purchased services", and their Salaries was 22%. So combined it was $35% and that was in 2007, five years after massive outsourcing it was their 4th largest cost, behind Fuel, Labor, and regional affiliates. When combined with labor it surpassed fuel (26%).

Bob, the issue is that other carriers have changed more... and it is perfectly valid to compare AA to other carriers.... as much as AA has changed relative to others, other carriers have made much bigger changes.
IF you want to see changes in productivity over a short period of time, look at NW. Even before BK and the AMFA issue, NW increased its productivity much faster than other carriers... in fact, NW really plateaued years earlier at the levels that became the standards of productivity that CO and DL rose up to - CO earlier in the 2000s and DL as a result of their BK and the growth cycle they entered after that.... note: DL's productivity grew AFTER BK and w/ the cost savings it got in BK. You have to grow after BK or restructuring in order to capture the benefits of the restructuring. Productivity benefits come from running the airline and growing it - not in the restructuring process.

They are adding management at JFK. We have more now than we did in the past despite having fewer workers.

WT keeps going on about adding heads yet he doesnt produce anything to support his assertions that the Union forces the company to employ more then they choose to. I told local management a year ago, now that they exhausted recall I would prefer that they didnt add any heads, even as people attrit out. I'd rather see our guys get more OT instead of going to a second job. OT is a more efficient way of obtaining additional income because there's no lost time.

If you look at the recent TA at UAL and the contract at UPS, in both cases the company is agreeing to bring more work in house. While the companies are touting this as concessions to Labor I dont hear too much from members about wanting to see the company hire more people. Given the choice between hiring more workers and more pay I'd say its probably close to 100% in favor of more pay.

The airlines have dug themselves into a hole. They've driven thousands of their youngest mechanics out of the industry, most no longer willing to return, half the schools closed their doors, and now they are looking at ever increasing waves of people retiring. The airlines overplayed their hand, now they probably could not bring as much work back in house as they had before if they wanted to, and sending it to domestic MROs isnt really an option since they face an even tougher problem in that their workforce is the primary source of workers. They can send of the work overseas, for now, but as the World Economy expands that option will become more and more costly. AA, which didnt partake in the frenzy of outsourcing is having a hard time getting enough mechanics to meet their needs. The younger guys continue to leave the industry, the older guys continue to retire and the rest in the middle are just trying to ride it out,following the example set by the company of tryting to get as much as you can while giving the least you can get away with giving.

Bob... scope is costly to any business.. it removes flexibility. OT is more expensive than being able to properly staff.
There is nothing wrong w/ bringing work back in house and it might make sense... but if you or any union tries to draw lines about what can or can't be outsrouced, you will likely get it wrong - and hurt the business. The industry changes very rapidly. Some things don't make sense for any US airline to do in house because of US labor costs... that is the unfortunate reality.

I don't disagree. But when you're looking at balance sheet reconciliations, you also have to remember that outsourcing reduces what the company is paying in social costs, e.g. healthcare & retirement. With that in consideration, I'd say there's a net positive to the company.

Instead of comparing companies against each other, do a year over year comparison for the same company, pre-outsourcing and post-outsourcing. Take the expense lines, divide per ASM, and when you compare, maybe the difference will be a little more obvious.

You can do that... but AA competes w/ its peers and you have to compare each company to its peers.

AA has not publicly talked about a lack of productivity among its maintenance employees like it has its pilots and flight attendants. The terms of those two workgroups' contracts give them, on average, more paid hours for fewer actual flight hours than at most other airlines, leading to AA's claim that those two workgroups are not very productive.

Not so with the AMTs. AMTs are scheduled for 40 hours a week, 52 weeks a year, less any vacation time earned, right? I guess it's possible that some show up for work and then don't do much work. If so, that's a management failure.

AA's AMTs have a wage rate that's among the lowest in the industry but there's two sides to that story. AA's line mechanics are very underpaid compared to UPS, FedEx and WN. AA's overhaul mechanics enjoy above-average pay compared to AMTs at stateside (domestic) MROs. As I've posted before, AA is probably not willing to pay its overhaul staff the same hourly pay that UPS, FedEX or even WN pays their line mechanics.

Overall, AA's employees may not be as productive as at AA's competitors. But that does not equal a claim that AA's maintenance employees are not as productive as maintenance employees at competitors.

Scope is how you increase productivity for regular non-crewemployees such as those who work a 40 hr week..

 

[FWAAA]

AA has publicly stated that it has, including M&R, the highest labor costs in the industry and an interpretaion of it's meaning has been thoroughly debated. Their own negotiations website states AA mechanics are above median pay but when put to the calculator we fall $2 below median. I can assure you they know full well that their Tulsa base mechanics are far below their productivity potential but they don't want to address it in negotiations. I believe it's because they want to achieve a neutral cost contract first and then address productivity as an uncompensated bonus. It's strange to me that some use comparisons between the majors inhouse maintenance and MROs. I am unaware that AA's mechanics have ever competed with MRO's for work on their own aircraft. AA will never turn a profit doing maintenance on their own a/c so why should we compare wage rates with businesses that must make a profit to survive?

I brought up MROs because they won the competition to overhaul most planes at nearly every other airline. UAL closed OAK and IND and laid off thousands of mechanics and now farms out its heavy overhaul. Most other airlines farm out most of their overhaul. UPS will eventually pay its AMTs $50/hr but that won't be paid to anyone to complete a D check (or in AA's parlance, a heavy C check). Same thing at WN and FedEx and UA, CO, DL, US and other airlines.

It's not about AA "turning a profit doing maintenance on its own planes," it's about which model is the lower-cost technique for overhauling 600+ airplanes: inhouse or MRO. Like it or not, the existence of guys willng to overhaul planes for $25/hr in the USA and for less in other parts of the world impacts the ability of AA's AMTs in Tulsa to try to raise their pay substantially above the pay at MROs.

If AA's overhaul mechanics produce superior work and do it more efficiently than the MROs, then AA will probably keep the work inhouse as long as the wage rates don't balloon too much, too fast.

 

[Birdman]

I brought up MROs because they won the competition to overhaul most planes at nearly every other airline. UAL closed OAK and IND and laid off thousands of mechanics and now farms out its heavy overhaul. Most other airlines farm out most of their overhaul. UPS will eventually pay its AMTs $50/hr but that won't be paid to anyone to complete a D check (or in AA's parlance, a heavy C check). Same thing at WN and FedEx and UA, CO, DL, US and other airlines.

It's not about AA "turning a profit doing maintenance on its own planes," it's about which model is the lower-cost technique for overhauling 600+ airplanes: inhouse or MRO. Like it or not, the existence of guys willng to overhaul planes for $25/hr in the USA and for less in other parts of the world impacts the ability of AA's AMTs in Tulsa to try to raise their pay substantially above the pay at MROs.

If AA's overhaul mechanics produce superior work and do it more efficiently than the MROs, then AA will probably keep the work inhouse as long as the wage rates don't balloon too much, too fast.

I'm surprised that AA has not done a test run on how their own maintenance "techniques" stack up to the winning MRO competition as we have a stable full of "out of time" 757's that could be used. I know, that is unlikely considering MRO's are probably as short on manpower as we seem to be considering we have several empty docks on base and AA is hiring at breakneck speed. I still contend that AA's maintenance bases are potentially second to none considering past performance but there are now few willing to go the extra mile.