Company serves up crap offers to pilots

[FURP3]

The grievances with this company are deep rooted and will not be forgotten or forgiven by simply watching management destroy the pilot profession and then the mechanic profession. I fully understand the grave consequences of BK, but I've prepared myself for the worst possible outcome because I knew 8 years ago AA management was on course to take more come 2008. I blame both labor and management for the condition of American Airlines.....management for reckless business practices and union for NOT representing the membership. I cannot look in the mirror and willingly accept more concessions because the only people I will be screwing are my children. American Airlines management are the most pathetic individuals on this planet because in 2003 they chose to rape their employees instead of doing their JOBS by downsizing the operation and laying off thousands. In 2008, the company chose a path of least resistance by stalling negotiations for 4 years, and further angering those same employees they raped 8 years earlier.....and then people on this forum wonder why the employees are entrenched in our stance against the company. The company chose this route 8 years ago and they will again choose the path of least resistance which will be BK, and that's fine with me........but, don't hold US hostage any longer and GO BANKRUPT ALREADY!!!!!!!!!!

AMEN....I will drive them to the courts where they will file......Then what threat will they have when they file....

 

[TWU informer]

AMEN....I will drive them to the courts where they will file......Then what threat will they have when they file....

That is agood point. After they file the management stick and threat is then gone, and they must get the house in order.

Probably the best move for the long term at this time.

I know I am tired of being manipulated and threatened by Bankruptcy.

 

[Buck]

Pilots and Bankruptcy

 

[Hopeful]

It will be interesting, if we do go into bk. will there be any thing left of AA. Its easy to say now, go into bk it will be no worse. Well it can be alot worse.

Usair can pick up the parts they want (routes, not people) just because delta and united surived bk, many others failed eastern, pan am, midway the list goes on. No we are not to big to fail, and thats what the other airlines are looking for so they can increase there market shares.

Nonsense....they file CH. 11, rape the employees and creditors, reward the executives for "HAVING TO MAKE THE OH SO DIFFICULT DECISION TO FILE, BLAH BLAH BLAH.."

They reorganize like the others did...Why should AA be any different in that "nothing will be left." Ridiculous..

 

[Jacobin777]

The grievances with this company are deep rooted and will not be forgotten or forgiven by simply watching management destroy the pilot profession and then the mechanic profession. I fully understand the grave consequences of BK, but I've prepared myself for the worst possible outcome because I knew 8 years ago AA management was on course to take more come 2008. I blame both labor and management for the condition of American Airlines.....management for reckless business practices and union for NOT representing the membership. I cannot look in the mirror and willingly accept more concessions because the only people I will be screwing are my children. American Airlines management are the most pathetic individuals on this planet because in 2003 they chose to rape their employees instead of doing their JOBS by downsizing the operation and laying off thousands. In 2008, the company chose a path of least resistance by stalling negotiations for 4 years, and further angering those same employees they raped 8 years earlier.....and then people on this forum wonder why the employees are entrenched in our stance against the company. The company chose this route 8 years ago and they will again choose the path of least resistance which will be BK, and that's fine with me........but, don't hold US hostage any longer and GO BANKRUPT ALREADY!!!!!!!!!!

I agree with you. But I am claiming the exception that I don't blame the employees as much as I blame inept management, and in particular Carty for not taking the lead and allowing the union's to decide how to manage the place during the 2003 crisis and after that Arpey and his gang of theives and consultants he hired to try an cover his inability to run this airline from day 1

Now the employees will finish it off and you and others will only focus on their faults.

But at this point who rally cares who gets blame or credit.

What really has hurt AA since 2003 is the cost of Jet Fuel which has added multiple $$ billions in extra expense. Besides WN which was hedge properly, there was not one carrier in the world which knew how much the price of Jet-A was going to affect them.

UA, DL, etc. also didn't have the liabilities (thanks to BK) AA has. It has allowed the aforementioned carriers to expand and take market share as well.

Rather than looking for a pay increase right now, maybe the unions leaders should look to getting stock post-BK for its constituents (if AA files for BK), as well as possibly a board seat (this part might be improbable however).

 

[Mach85ER]

"Besides WN which was hedge properly, there was not one carrier in the world which knew how much the price of Jet-A was going to affect them."

That was a bet by them that was no better than dropping the money on red instead of black in Vegas on a roullette wheel. Unless of course they clued in by someone inside the small little world of crude oil trading.

 

[TIME FOR CHANGE]

It should be abundantly clear by now that AA cannot operate a business model that provides its employees with a level of compensation and benefits of other airlines.

Ya Think :blink:

 

[TWU informer]

Dear Mr. Arpey,
As you know, our respective negotiating teams have invested a great deal of time and effort during the past several months in an effort to reach a new APA-AA collective bargaining agreement.

APA leadership shares your desire to conclude negotiations expeditiously and we remain focused on reaching an agreement that is good for our pilots and good for the airline. To that end, we have consistently expressed our desire to see the company succeed and have demonstrated our willingness to adopt contractual solutions that represent departures from longstanding tradition. Although management's most recent proposal does not sufficiently address our pilots' most critical negotiating priorities, we are nevertheless committed to reaching a mutually beneficial agreement through good-faith bargaining at the earliest opportunity.

We remain ready and willing to discuss creative solutions that address our respective parties' concerns so that we may promptly conclude these talks.


UPDATE: The union's hotline said the 18-member board voted 17-1 in favor of the letter. The only signature missing appears to be that of New York LaGuardia base vice chairman Michael Cummings.

 

[JFK Fleet Service]

Rather than looking for a pay increase right now, maybe the unions leaders should look to getting stock post-BK for its constituents (if AA files for BK), as well as possibly a board seat (this part might be improbable however).

That supposes foresight on the part of the unions, remember not one of them demanded "Snap Back" language in 2003.

The TWU at least is only interested in dues revenue and will grab its ankles and smile in order to continue to keep that money flowing in.Personally I think AMR is going to go bankrupt and rather than tapdance around and hope the pilots accept their substandard offer I would rather have them get it done with.Of course they lose their most effective weapon in the FUD category, but I've never operated on the assumption I'll be getting a pension from this place and have had my 401K contributions set accordingly.

 

[Hopeful]

What really has hurt AA since 2003 is the cost of Jet Fuel which has added multiple $$ billions in extra expense. Besides WN which was hedge properly, there was not one carrier in the world which knew how much the price of Jet-A was going to affect them.

UA, DL, etc. also didn't have the liabilities (thanks to BK) AA has. It has allowed the aforementioned carriers to expand and take market share as well.

Rather than looking for a pay increase right now, maybe the unions leaders should look to getting stock post-BK for its constituents (if AA files for BK), as well as possibly a board seat (this part might be improbable however).

First, labor is the last remaining UNCONTROLLABLE cost. Fuel is not.....That's why they're attacking us. They have and always will blame labor for their costs even after BK

Second, do you really want stock as part of your compensation? Unless you're an executive with an already substantial salary, stock is the worst form of compensation you would want. How does $1.91 per share tickle your fancy?

Lastly, even if each union gets a seat on the board, they will be looked down upon by the other BODs as not being "equal" to them and maybe being their union nemesis!

 

[WorldTraveler]

Jacobin
The problem with your theory is that other airlines (as you have noted) have had to deal with high fuel prices just as AA has. WN had good hedges that lasted for several years and they used that advantage to aggressively expand in PHL and DEN; as those hedges are running out, WN has become a whole lot more conservative in its expansion. So, the whole rising fuel price issue is a red herring when talking about why AA has not been able to turn the industry around.
.
Further, AA’s balance sheet was actually fairly equivalent to if not better than the carriers that came out of bankruptcy; despite the notion that BK wipes out lots of debt, those carriers came out w/ lots of debt on their books. What those carriers have done in the past 5 years is pay down their debt by making money operating their businesses; AA has done just the opposite.
.
You and others have argued for years that AA had some huge disadvantage with their pension obligations – until it was acknowledged here what I have said for years in that DL has larger pension obligations STILL ON ITS BOOKS than AMR does because DL froze, not terminated the majority of its pensions.
Further, AA employees took paycuts of the same magnitude if not larger than what some of the employees of formerly BK companies took – but those other airline employees have begun to recover some of their cuts through stock in the reorganized companies, cash payouts upon emergence from BK, and more recently pay raises and profit sharing. AA employees have seen none of that.
.
What is accurate is that AA mgmt slashed pay and benefits of AA employees in 2003 and then expected to sit by and wait for other carriers to fail, hoping that would provide AA with the breathing room necessary to complete the turnaround. AA didn’t cut the workforce to levels necessary for AA to succeed given its then current network size. Even though by 2007 it became very apparent that all 4 formerly BK network carriers would successfully restructure, AA mgmt failed to put a plan in place to turn the company around – and is just now getting serious about doing so. AA mgmt expected that pay raises at other carriers as part of the merger process would narrow the gap between AA’s labor costs and that of other carriers. AA mgmt argued for years that they could be successful as a standalone carrier, yet now they are having to ask for unlimited domestic codeshare in order for AA to compete with larger and lower cost carriers. Low fare and network carriers continue to challenge AA in its core revenue markets and most recently, low fare carriers that forced AA out of many NYC markets have now shown up in ORD and DFW markets – with the predictable result that AA’s share of those markets has fallen quickly while those competitors have quickly established market shares of 20% or more in less than a year.
.
The unmistakable bottom line is that AA management has failed at every turn over the past 8 years to understand the dynamics of the industry and to make decisions that would protect AA’s franchise.
.
AA employees are now being asked to make cuts that will exceed what other carriers’ employees took in their restructurings. For example, there is no basis for any network carriers’ employees to agree to unlimited domestic codesharing; the closest example of such extensive codesharing is AS – and yet their company is growing and is also able to defend its own key markets. Yet AA says they must codeshare on the US Shuttle because they don’t have slots in the NE despite the fact that AA operated the same shuttle markets just a couple years ago – but with RJs which can’t compete against DL and US’ mainline jets.
.
It is time for AA mgmt and its supporters to quit making excuses for why AA can’t compete and telling lies about why AA employees need to agree to concessions.
Since the AMR board has been unable to see that the future of AA is very much in jeopardy, AA employees have to do what they believe is in their own best interest – which increasingly appears to be to hold on to what they have until the ship sinks.
It is far from a certainty that AA can successfully restructure; unlike in the early to mid 2000s when there were 4 network carriers in BK, AA is the only major network carrier in major strategic trouble and the 80% of the US industry that is now successfully operating during situations in which they previously lost boatloads of money are standing ready to pounce on the 15% of revenue that AA continues to control. And those carriers’ successes in markets from NYC to ORD to DFW (AA’s cornerstone markets) are indications that the competitive assaults will only grow.
It’s time to quit making excuses for why AA is in the position it is in today and hold AA mgmt responsible for not using the concessions it did gain 8 years ago and for failing to understand and react to the changes in the industry. It is now not at all unreasonable that AA employees, in the face of being asked to give up far more than what other airline employees have given up, for AA employees to protect their own interests – as well as the interests of the industry.
.
And to be very blunt, there are a lot of other airline employees who would just as soon see AA fail than to allow them to impose concessions that will affect pay, benefits, and scope throughout the industry.

 

[strikeforce]

Jacobin
The problem with your theory is that other airlines (as you have noted) have had to deal with high fuel prices just as AA has. WN had good hedges that lasted for several years and they used that advantage to aggressively expand in PHL and DEN; as those hedges are running out, WN has become a whole lot more conservative in its expansion. So, the whole rising fuel price issue is a red herring when talking about why AA has not been able to turn the industry around.
.
Further, AA’s balance sheet was actually fairly equivalent to if not better than the carriers that came out of bankruptcy; despite the notion that BK wipes out lots of debt, those carriers came out w/ lots of debt on their books. What those carriers have done in the past 5 years is pay down their debt by making money operating their businesses; AA has done just the opposite.
.
You and others have argued for years that AA had some huge disadvantage with their pension obligations – until it was acknowledged here what I have said for years in that DL has larger pension obligations STILL ON ITS BOOKS than AMR does because DL froze, not terminated the majority of its pensions.
Further, AA employees took paycuts of the same magnitude if not larger than what some of the employees of formerly BK companies took – but those other airline employees have begun to recover some of their cuts through stock in the reorganized companies, cash payouts upon emergence from BK, and more recently pay raises and profit sharing. AA employees have seen none of that.
.
What is accurate is that AA mgmt slashed pay and benefits of AA employees in 2003 and then expected to sit by and wait for other carriers to fail, hoping that would provide AA with the breathing room necessary to complete the turnaround. AA didn’t cut the workforce to levels necessary for AA to succeed given its then current network size. Even though by 2007 it became very apparent that all 4 formerly BK network carriers would successfully restructure, AA mgmt failed to put a plan in place to turn the company around – and is just now getting serious about doing so. AA mgmt expected that pay raises at other carriers as part of the merger process would narrow the gap between AA’s labor costs and that of other carriers. AA mgmt argued for years that they could be successful as a standalone carrier, yet now they are having to ask for unlimited domestic codeshare in order for AA to compete with larger and lower cost carriers. Low fare and network carriers continue to challenge AA in its core revenue markets and most recently, low fare carriers that forced AA out of many NYC markets have now shown up in ORD and DFW markets – with the predictable result that AA’s share of those markets has fallen quickly while those competitors have quickly established market shares of 20% or more in less than a year.
.
The unmistakable bottom line is that AA management has failed at every turn over the past 8 years to understand the dynamics of the industry and to make decisions that would protect AA’s franchise.
.
AA employees are now being asked to make cuts that will exceed what other carriers’ employees took in their restructurings. For example, there is no basis for any network carriers’ employees to agree to unlimited domestic codesharing; the closest example of such extensive codesharing is AS – and yet their company is growing and is also able to defend its own key markets. Yet AA says they must codeshare on the US Shuttle because they don’t have slots in the NE despite the fact that AA operated the same shuttle markets just a couple years ago – but with RJs which can’t compete against DL and US’ mainline jets.
.
It is time for AA mgmt and its supporters to quit making excuses for why AA can’t compete and telling lies about why AA employees need to agree to concessions.
Since the AMR board has been unable to see that the future of AA is very much in jeopardy, AA employees have to do what they believe is in their own best interest – which increasingly appears to be to hold on to what they have until the ship sinks.
It is far from a certainty that AA can successfully restructure; unlike in the early to mid 2000s when there were 4 network carriers in BK, AA is the only major network carrier in major strategic trouble and the 80% of the US industry that is now successfully operating during situations in which they previously lost boatloads of money are standing ready to pounce on the 15% of revenue that AA continues to control. And those carriers’ successes in markets from NYC to ORD to DFW (AA’s cornerstone markets) are indications that the competitive assaults will only grow.
It’s time to quit making excuses for why AA is in the position it is in today and hold AA mgmt responsible for not using the concessions it did gain 8 years ago and for failing to understand and react to the changes in the industry. It is now not at all unreasonable that AA employees, in the face of being asked to give up far more than what other airline employees have given up, for AA employees to protect their own interests – as well as the interests of the industry.
.
And to be very blunt, there are a lot of other airline employees who would just as soon see AA fail than to allow them to impose concessions that will affect pay, benefits, and scope throughout the industry.

Couldn't have said it any better! Thanks!

 

[WorldTraveler]

Couldn't have said it any better! Thanks!

I can only wish you and the rest of AA's employees the best in the months ahead... and still think the best is probably outside of the airline industry.
Kudos to those who have prepared.

 

[FWAAA]

Jacobin
The problem with your theory is that other airlines (as you have noted) have had to deal with high fuel prices just as AA has. WN had good hedges that lasted for several years and they used that advantage to aggressively expand in PHL and DEN; as those hedges are running out, WN has become a whole lot more conservative in its expansion. So, the whole rising fuel price issue is a red herring when talking about why AA has not been able to turn the industry around.

While you are correct that all airlines had to deal with high fuel prices, there are analysts in the news this week blaming fuel price increases more than labor costs for the mess AA finds itself in:

Gimme Credit analyst Vicki Bryan took a hard look at AMR's numbers in her investor report Monday and pointed out that despite annual revenue rising 35 percent since 2003, AMR is still posting significant losses.

"The main culprit, however, has not been AMR's labor costs. It was spiking fuel expense, which is up 187 percent from $2.8 billion per year in 2003 to the current $7.96 billion," Bryan wrote.

Bryan told investors that AMR's top executives are receiving compensation packages worth 10 times their base pay and are earning more than the top executives at United Continental and are close to Delta Air Lines' executive pay. Those two airlines are posting consistent profits.

http://www.star-telegram.com/2011/11/15/3528873/pilots-union-rejects-american.html

I don't agree with Ms Bryan's take, but wanted to point out that there is no consensus that fuel plays no part among the reasons for AA's financial straits. She blames fuel and management pay.

Fuel prices have harmed all legacy airlines. If fuel had topped out at $1.50/gal and never gone higher, all airlines would have reported record profits after slashing wages and other costs. Of course, it's likely that employees would have demanded higher wages and their concessions would have been recovered much more quickly. History shows that management will settle wage issues quickly if needed to protect profitable operations. When losses are the rule, management is in no hurry to agree to higher wages.

AA's problems have many causes, but to dismiss the six-fold increase in fuel prices since 1999 is a bit myopic, IMO. Yes, the other legacies have had to deal with high fuel prices as well. With lower labor costs and lower other costs than AA and recently, better revenue growth (in part because of their low costs enabling consolidation and expansion in key markets) than AA, they have managed to handle the fuel spike of 2011 much better than they handled the fuel spike in 2008.

 

[FWAAA]

IIRC, AA is still at a pension disadvantage over its peers, especially when UA, DL, NW, etc. "dumped" their pension obligations to the PBGC.

I disagree. The AA pensions have required about $300 million per year on average of cash contributions over the past decade. And as WT points out, Delta continues to contribute to all of its pensions (except the terminated pilots' pension) and its underfunded amount is about 50% more than AA's underfunded amount. DL provides a defined contribution plan as well, so its total retirement costs (on an annual cash basis) are higher than AA's total retirement costs on a cash basis.

Years ago, James Beer (CFO) and Arpey told the investment community that AA's plans were less costly on a cash basis than a defined contribution replacement and my analysis confirms that. 10 years ago, WN about 1/3 the number of employees that AA had and now has about 1/2 the number of employees of AA, yet its defined benefit plan expenses are almost as large each year as AA's cash contributions to its DB pension plans.

Note that I've been stressing "cash basis" and not GAAP cost. Over the past decade, what really matters to AA is not running out of cash. Although management has failed in many areas, AA management has excelled at not running out of or low on cash since early 2003. AA has burned a lot of furniture and sold new stock to suckers and borrowed more money and done everything in its power to keep the cash balance up. The alternative, of course, is Ch 11, and Arpey and the rest have said over and over that they want to avoid Ch 11 if possible.

On a GAAP basis, yes, the pensions can be very costly. But on an out-of-pocket cash cost, AA's pensions have been relatively cheap over the past 10 years. AA's pension investments performed better than other airlines during the 1982-2001 bull market and helped enable AA to avoid Ch 11 in the wake of September 11, 2001, as its pension underfunding was nowhere as large as at US or UA. Both were forced to file Ch 11 because neither could afford their minimum pension contributions due in 2002-03. AA could afford theirs.

If the equity markets experience another multi-year bull market like 1982-2001, AA's pensions will be very cheap on a cash basis. If markets experience another sideways decade like the most recent ten years, they will require more cash.

Retiree medical, on the other hand, is a problem. AA needs to solve that problem, as no stock market boom can hope to save AA from that mess.