Concession Talk Coming Tuesday

[will fix for food]

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On 2/4/2003 2:51:57 PM WingNaPrayer wrote:

The only saving grace in all this BS is that it just might be the catalyst that makes the agent groups get off their collective asses and go for the CWA vote. Something tells me that when all is said and done, the agents are going to wish they had a contract.
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Hmmm.......WNP= A/A agent / CWA organizer?

Just a guess.

 

[flyhigh]

Red Foreman...

Are you serious? AMR is lower than both UAL (pre Ch11) and DAL! WOW, that's great. Wonderful company to be in! Let's see, UAL is in bankruptcy, and DAL, while stronger than AMR financially right now, lost $1B last year alone. Is that the company you want to be in? How about AirTran, JetBlue, and Southwest? They made money. Now, you can say a lot of things about the operational aspects of their business that make them more efficient. I'll grant you that. However, all of them fail miserable in getting people to Springfield, MO. If we all went to WN style, the country's largest employer, Wal-Mart, would loose service to its home. So, let's not go that direction. Let's, however, focus on what makes them different in how they compensate employees. I'll start this off by saying that WN does a fenominal job of informing their employees of exactly what's going on. Most mainline carriers, minus CO, do a horendous job of this. AMR NEEDS to get employees involved. They need to create a sense of ownership/empowerment. They need to adopt WN's strategy of hiring for attitude and train skills...not the opposite!!! This idea that just because an individual can speak a foreign language, they must have great customer svc skills is ridiculous (see MIA hub!).

What about the huge expense that AMR, et. al., laid out this past year for pensions? I didn't hear WN saying much about that?

Lastly, I'll finish by reminding people who say the company hasn't changed the model that part of the $2B in savings was derived from the changed in the bank structure at ORD & DFW. By moving to the continuous flow system, AMR not only gets better utilization out of the aircraft, they got better productivity out of employees, and in some cases were able to reduce the amount of gates (rental fees) needed for the operation.

 

[sfb]

I don't think that bankruptcy was "Plan A" at US Airways or United, and I don't think it's AA management's primary goal, either. If you think back to spring of 2002, airline revenues were on their way back up, and most airlines were predicting that profits would return in 2003, fueled by an economic recovery which most anticipated would happen during the latter half of 2002. In fact, US Airways' initial business plan contained within its loan guarantee application had more optimistic assumptions regarding unit revenues than their current business plan.

The problem for US Airways (and later, United) is that they simply ran out of time. The company's negotiations with its labor groups AND its creditors dragged on for far too long; had they had signed agreements for concessions from all stakeholders in time, they could have closed on the guaranteed loan and avoided Chapter 11. To add insult to injury, the incipient recovery in traffic/yield fizzled out toward the end of the summer, followed by plummeting revenues during the fall. Remember, most forecasts were for a much brighter economic picture last fall.

US Airways knew that bankruptcy was a very real possibility, and they certainly planned for it (wisely, I think) as a contingency. That's why they had submitted a dual-track loan guarantee application. I just believe they were unable to convince their unions AND lessors how urgent the situation until it was too late. That said, the loan guarantee money might have only postponed the liquidity crisis given the ongoing weakness in the industry.

As for United; it seems to me that management and labor together did not take the loan guarantee process, as well as the airline's precarious financial situation, seriously enough. The airline's revenue assumptions were unrealistic given trends in the industry, and neither labor nor management were willing to make the deep cuts demanded by the ATSB for approval of the loan guarantee (the ATSB pretty much told UAL management what numbers they had to hit). It seems as if UAL management and its unions both felt that United was too big to fail and that the ATSB decision would go their way given enough political pressure. It's also surprising how poor United's planning for bankruptcy was; the company ended up being forced to agree to rather draconian conditions as part of its DIP financing. And it's not clear that UAL will be able to meet the cash flow requirements of the financing, which could trigger liquidation. It's hard to see how management would benefit from a liquidation of the company.

Now turn to the topic at hand - American. The company has announced that the train wreck is coming. AMR lost about $3.15 billion last year excluding special charges, and it's likely that 2003 will be alomst as bad as 2002 for the airline industry. So, given that AMR's cash reserves are dwindling, they do need to make cuts over the $2 billion that have already been made before asking labor to contribute (and clearly some of those cuts helped ameliorate losses in 2002). I'd imagine that the cuts would need to be $1.5 billion or more to get AA close to break-even in 2003.

Whether or not you think management is at fault is not the issue; I will wholeheartedly agree that they are not blameless. The facts remain, though, that AMR's financial health continues to deteriorate, and it's a heck of a lot better to work on a solution now than to argue for months and months until the company is in critical condition. It would seem to me that short-term concessions, tied to unit revenue improvements (i.e. they end if the company hits certain targets), would be relatively equitable and help give the company room to avoid bankruptcy. Perhaps profit-sharing would also ensure that employees benefit from furure improvements in the business, or tying unionized labor pay increases (by percentage) to management pay increases would do the same.

 

[AAquila]

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On 2/4/2003 7:32:57 PM sfb wrote:


Whether or not you think management is at fault is not the issue; I will wholeheartedly agree that they are not blameless. The facts remain, though, that AMR's financial health continues to deteriorate, and it's a heck of a lot better to work on a solution now than to argue for months and months until the company is in critical condition. It would seem to me that short-term concessions, tied to unit revenue improvements (i.e. they end if the company hits certain targets), would be relatively equitable and help give the company room to avoid bankruptcy. Perhaps profit-sharing would also ensure that employees benefit from furure improvements in the business, or tying unionized labor pay increases (by percentage) to management pay increases would do the same.
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[/blockquote]
Great response, finally someone got it right.

 

[flyhigh]

Good points by sfb. Most people would agree that UA should have filed a lot earlier. It's understandable that they want to avoid ch.11, but they simply screwed up that one. That's one thing that AMR has seemed to do better. UA dragged it's feet on all aspects of this current recovery effort. AMR went stright into it. Hopefully it results in a positive end.

I for one believe that for the gov't part, the hope is that UAL & US fail which would allow for stabilization for the remaining carriers while not having to help the carries with tax dollars.

 

[1AA]

http://www.twu562.org/costpresentation.pdf

 

[NewHampshire Black Bears]

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On 2/4/2003 536 PM bagsmasher wrote:

DFWFSC,
I hope to HE*L your right about the "little station scenario" !!
There is(almost) nothing worse than being stuck in a little pi*s hole station, when the system is frozen.

NH/BB's



NewHampshireBlackBears




NH/BB's,
Some of us guys in little pi*s hole stations take offense to your comments. Some of us don't want to live in ORD,DFW,STL,MIA,LAX, or NYC. It's been going that way for a long time though. How many stations have been closed in the last 10 years? Too many to remember.
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Bagsmasher,
When I made that statement(small stations) I knew you'd be the first response !!
Well I did'nt mean any offense to my fellow "small station" co-workers.
But Bags,
The reality is we All very well might be heading for a hub, or large(non-hub) station(JFK/LAX/BOS), "OR", we can "hit the bricks" !!
In your case,MCI is not that far away from ORD/STL.
I can honestly say,having worked in a hub, and large station, was not the end of the world.

NH/BB's

 

[1AA]

February 4, 2003



Mr. James C. Little

Director Air Transportation Division

International Air Transport Division

Transport Workers Union, AFL-CIO

1791 Hurstview Drive

Hurst, TX 76054



Dear Jim:



Last year we began the process of working together to save American from the financial crisis confronting our industry. Thank you for your efforts to work with us during these challenging times, and for embracing the active engagement process to work collaboratively to seek mutually acceptable solutions to our problems.



As we expect your financial advisors have confirmed, our cost structure is simply not sustainable in today’s aviation marketplace, particularly as pricing actions by low-cost and bankrupt carriers continue to exert unrelenting pressure on our financial situation.



We took a different approach from other major carriers to respond to these and other industry altering dynamics. Before turning to our employees for financial help, we first implemented an aggressive restructuring plan to reduce costs and increase revenue. Through the plan, we have identified $2 billion in annual, permanent, structural changes – a cost savings greater than any other airline. In doing so, together we are making significant changes in our operation, our product and our service to build a more efficient and innovative airline.



But we need to do more, and we need to do it now. We continue to lose millions of dollars every day, forcing us to borrow vast sums of money just to meet payroll and stay in business. Now, our number one priority must be to deliver the additional $2 billion we estimate that we need to survive. Our financial results make it abundantly clear that American’s future cannot be assured until ways are found to significantly lower our labor and other costs. The recent experience of other high-cost carriers demonstrates that the longer we wait to take action, the action that is necessary will become increasingly more severe. Clearly it is not in our employees’ best interest to follow these examples.



Today, as a last resort, we are taking the difficult step of asking all of our employees to participate in American’s recovery by working with us to deliver $1.8 billion in permanent, steady-state savings. We hope to work collaboratively with you to restructure labor agreements to realize these permanent, annual savings and those needed to address our long-term financial health.



In response to your request, we have proposed the portion each work group would contribute toward our airline’s recovery. To be as fair and equitable as possible, the portions were based upon a combination of factors, including an alignment with American’s strategic restructuring plan, the competitive landscape and a review of industry labor costs.



Page 2 of 3



Based on this review, the TWU Represented employees portion is $620 million. We want to work with you to determine together how best to achieve these savings, and expect it would be through a combination of changes in wages, benefits and work rules.



The other work groups’ portions are as follows (in millions):



Pilots $660

Flight Attendants 340

Agents and representatives 80

Management and support staff 100



Be assured that management will continue to do its part. Today’s $100 million allocated to management and support staff is in addition to the over $200 million in savings already achieved through a 22 percent reduction in these positions and forgoing across-the-board management pay increases for a second straight year.



We have opened our books to review by your financial advisors, and we will continue to provide information necessary for you to reach an informed judgment on TWU’s participation in these fundamental changes in our business. Importantly, as we work toward our recovery, you have our commitment that all employees will share in the opportunities any successful restructuring might provide.



Given the urgency of our situation, we are moving as quickly as possible with our on-going restructuring efforts. We are currently:



Closing two of our ten domestic reservation offices: Norfolk, Virginia and Las Vegas, which will unfortunately impact approximately 910 reservation representative positions; and


Seeking to obtain accommodations from a number of our other stakeholders, including aircraft lessors, lenders and suppliers.


Unfortunately, we have little other choice. What we do have is an opportunity no longer available to our counterparts at United and US Airways: the chance to work together to find mutually acceptable solutions to our financial crisis in order to avoid the uncertainty of the courts and creditors determining our fate.



Given the magnitude of this request and the sacrifice we are asking of our employees, the importance and impact of your leadership during this pivotal time is critical to our success. In the face of difficult decisions, courage and vision must triumph.













Page 3 of 3



In our proud history, we have worked together to overcome many challenges and have earned a well-deserved reputation for innovation and superior service. This is a painful time, but we are confident that the men and women who have built their careers at American will recognize the gravity of the situation and work with us as we embark upon a difficult but necessary journey toward recovery. We are grateful for and inspired by the determination and dedication of the people of American and know that with your support, we will succeed.





Sincerely yours,



Donald J. Carty Gerard J. Arpey

Chairman and CEO President and COO

 

[1AA]

FOR RELEASE: Tuesday, Feb. 4, 2003





AMERICAN AIRLINES CALLS FOR $1.8 BILLION IN EMPLOYEE COST CUTS



Annual Savings Required to Make Airline Competitive

Changes Can Come from Wages, Benefits and Work Rules

Shared Sacrifice Includes Management, Non-union and Union Groups



FORT WORTH - Citing its unsustainable current losses and the long-term need to restructure its business, American Airlines today asked its labor leaders and employees for $1.8 billion in permanent, annual savings through a combination of changes in wages, benefits and work rules.

“We have together made significant changes in our operation, our product and our service to build a more efficient and innovative airline,â€￾ the company said in letters to union leaders and non-represented employee workgroups.

“But we need to do more. And we need to do it now. Our financial results make it abundantly clear that American’s future cannot be assured until ways are found to significantly lower our labor and other costs.â€￾

In the letters, AMR Chairman and CEO Don Carty and President Gerard Arpey noted that, unlike other financially troubled airlines, the company turned to employees as a last resort, and only after pursuing an aggressive restructuring plan that identified $2 billion in annual, structural cost savings.

Company executives have said the airline needs an estimated $4 billion in permanent annual savings to compete effectively and return to profitability.

The company cited pricing actions by low-cost and bankrupt carriers among the factors putting “unrelenting pressureâ€￾ on the company’s financial situation.

- more -




“Today, as a last resort, we are taking the difficult step of asking all of our employees to participate in American’s recovery by working with us to deliver $1.8 billion in permanent, steady-state savings. We hope to work collaboratively with you to restructure labor agreements to realize these permanent, annual savings and those needed to address our long-term financial health." The company also said it would seek to obtain accommodations from a number of its other stakeholders, including aircraft lessors, lenders and suppliers.

In addition, the company announced the latest steps in its ongoing restructuring efforts, stating it plans to close two of its 10 domestic reservations offices – Norfolk, Va., and Las Vegas – impacting approximately 910 reservations representative positions.

According to the company’s proposal, the $1.8 billion in cost savings would be divided by work group as follows:



· Pilots: ($660 million)

· Flight attendants: ($340 million)

· TWU Represented employees: ($620 million)

· Agents and representatives: ($80 million)

· Management and support staff: ($100 million)



Each work group’s share was allocated in consideration of American’s strategic goals as well as a review of the competitive landscape and labor costs at other airlines. The company said it hopes to work collaboratively through a process of active engagement with union leaders and non-unionized employee groups to determine how each will deliver its share of the targeted savings through a combination of changes in wages, benefits, and work rules.



- more -






In the meeting, Carty and Arpey assured labor leaders that management would continue to do its share and emphasized that today’s proposed cuts come on top of a second year of across-the-board pay freezes for management and a 22 percent reduction in management and support staff positions, resulting in more than

$200 million in savings to date.

“Unfortunately, we have little other choice,â€￾ Carty and Arpey wrote. “What we do have is an opportunity no longer available to our counterparts at United and US Airways: the chance to work together to find mutually acceptable solutions to our financial crisis in order to avoid the uncertainty of courts and creditors determining our fate.

“Given the magnitude of this request and the sacrifice we are asking of our employees, the importance and impact of your leadership during this pivotal time is critical to our success,â€￾ Carty and Arpey wrote to union leaders.

“This is a painful time, but we are confident that the men and women who have built their careers at American Airlines will recognize the gravity of the situation and work with us as we embark upon a difficult but necessary journey toward recovery,â€￾ Carty and Arpey concluded. “We are grateful for and inspired by the determination and dedication of the people of American and know that with their support, we will succeed.â€￾

 

[1AA]

FOR IMMEDIATE RELEASE:



For information: Contact TWUA (817) 282.2544



TRANSPORT WORKERS UNION JAMES C. LITTLE

SKEPTICAL ABOUT SHARED SACRIFICE

PROPOSED BY AMERICAN AIRLINES EXECS



Dallas, TX, February 4 --- In response to American Airlines call today for $620 million dollars in contractual relief from the his union’s members, James Little, Director of the Air Transport Division of the Transport Workers Union of America (TWU) AFL-CIO, issued the following statement:



We understand the seriousness of our airline’s financial condition, but we find much to be skeptical about in CEO Don Carty and President Gerard Arpey call for a shared sacrifice. We have requested that AMR management provide in detail, both financially and operationally, how they came to the conclusion for the need for a total of $620 million in cost savings from our members. Management has agreed to address our request beginning Friday, February 7, 2003.



The TWU will review the proposal in good faith as we are required to do by law, but all of these questions and more must be addressed before we can present any proposal for relief to our members. Any modifications of our present agreements would, of course, have to be ratified by the same memberships, which approved them, and, at present, we have no plans to present them with such proposals.

 

[1AA]

To: All AA Presidents 501-590



Today, the Company proposed that the various unions on its property
provide contractual relief totaling close to two billion dollars. The TWU
will, in accordance with our legal obligations, review this proposal in
good faith. However, we also have a legal and ethical responsibility to
our members to scrutinize any such requests carefully and skeptically.

Even at this early stage, there is much to be skeptical about. For
example, we do not see how the proposal addresses the layers of managers
and supervisors added to TWU staffed operations even after September 11,
2001. It is also not clear to us what our members would receive in
exchange for the deep sacrifices called for by the Company. While we
intend to work in earnest to help the Company survive, all of these
questions and many more must be addressed before we could present any
proposal for relief to our members. Any modifications of our present
agreements must be ratified by the same memberships which approved those
agreements.



Sincerely and fraternally,



James C. Little