Doug Parker's Letter to employees

[Mrs. McFly]

So far it sounds like a very expensive bill of goods promised to the unions. Just cutting the number of furloughs is about $350 million a year. But making promises to the AA employees is only half of a POR - the other half is how to pay for those promises and still show a better return for the creditors than AA's stand alone plan. That means more revenue to pay for all those promises plus offer the creditors a better return. The $500 million in extra synergies that have been leaked won't go far when the bills come due...

Jim

That's true. I can think of a few creditors who may have a thing or two to day about this. I agree and don't see it all happening the way Parkerw outlines in his vague way.

 

[Bob Owens]

So far it sounds like a very expensive bill of goods promised to the unions. Just cutting the number of furloughs is about $350 million a year. But making promises to the AA employees is only half of a POR - the other half is how to pay for those promises and still show a better return for the creditors than AA's stand alone plan. That means more revenue to pay for all those promises plus offer the creditors a better return. The $500 million in extra synergies that have been leaked won't go far when the bills come due...

Jim

Synergies is another word for headcount cuts.

 

[Phoenix]

but you really don't know that, do you? You also don't know if the rest of the creditors (non-labor) believe a US merger is in AMR's best interests?
And I can assure you that if US speaks to the creditors regarding a potential merger, so will other parties... because the creditors will consider every option and choose the best one.
And it is far from certain that US would end up as the best option at that point.

Sure, everyone can come up with lots of money, but at the end of the day, the real value is in access to established paying customers and the systems that convey them.

 

[Phoenix]

Wow, as a frequent flyer and business owner it amazes me at the lack of foresight so many people have. I would ask the AA Unions this:

1) If US Airways was so great with labor why are they still basically operating under two sets of agreements?
2) If US Ariways management was so great, why have they continually been looking for a date to the prom, with no one willing to take them?
3) If you think your management team controls your destiny, YOUR WRONG, the frequent flyers do.

There are many PLTs & EXPs and many more that are international business travelers like myself that have chosen to fly American because of the U.S. airlines it has the best service, especially internationally. Many of us who don't fly Emirates or these other "better" service airlines because the mileage we accumulate on them are useless to us anytime we want to fly anywhere in the Americas, and their service from the U.S. always takes you to some out of the way stopover. We are the ones who spend our money because of the service we get from AA, both the service from the flight crews as well as ground and ticketing, as well as the service from the planes themselves. Granted, I think we are all looking forward to a new fleet of airplanes and upgraded amenities, but its still better than anything anyone else in this country offers. I mean UnitedContinental doesn't even offer a true first class on many international flights ----> their international BusinessFirst is a joke, especially at the price point.

I view US Airlines as an expensive low-cost carrier. I view it as another southwest but assigned seating. I have flown US AIR and I mean NO DISRESPECT TO ANY OF THEIR HARDWORKING EMPLOYEES but to me this is just a step down for AA as far as service.

This is an attempt by AA Unions to get leverage, by getting into bed with a management team that has a history of making big acquisitions, not of making big strides in making their company better. The merger happens, the combined airlines will scuttle, and they will begin layoffs. At least with the bankruptcy and AA you know the layoffs upfront. Those layoffs will still happen in a merged airline.

US AIRWAYS WANTS YOUR SOUTH AMERICAN AND INTERNATIONAL ROUTE STRUCTURE. US Airways brings NOTHING to the table. You are all being used.

Cheers,
777 / 767 / 787

Ha, ha... nothing but a profit.

 

[Kittyhawk]

I'm sure there is plenty of speculation over the new look. But I like this one.

 

[BoeingBoy]

Synergies is another word for headcount cuts.

Not exclusively, but that's a part of it. Just remember that there's only a job for one CEO, President, etc after a merger too. The difference is that those at that level that lose their job have golden parachutes. But there would be headcount reductions at most all levels following a merger.

Jim

 

[SBN580]

And there is the hook right there.... "I'll promise you pay raises to get you to industry standard" (what does that mean anyway - if it is average, then don't hesitate to say so.... otherwise, it probalby isn't).
.
I'll raise US salaries to AA levels and save 6000 AA jobs... but makes no commitment to saving the existing level of US jobs.
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The devil is in the details and this is nothing more than promises to people who are desperately looking for them - even if they cannot be delivered.

IS a few years of Euphoria worth it if it is followed by another Bk filing because promises were made that could never be made?

Remember, US has had MULTIPLE trips through BK... and they still pay their employees bottom of the barrel wages and have below average revenue generation.

Just last evening I saw on a union leader say that US promised NO jobs would be lost, not one. Really?! What kind of kool aid does Parker serve?

link: American Airlines unions back U.S. Airways merger

 

[SBN580]

US Airways brings NOTHING to the table. You are all being used.

Cheers,
777 / 767 / 787

Your last sentence says it all. Though the rest of you comments were excellent as well.

 

[SBN580]

Yes, as a customer I fear this day.......every time I am on a flight to PVG, DEL, LHR, etc, I talk to the crews, the crews I have come to love. ON a trip back from PVG thru LAX last month I told two FAs upfront where I was sitting that "After a long week, and many times two weeks in Asia, as soon as I walk around that corner and see the AA on the tail, I begin to feel like I am almost home. Once I walk on to the plane, I truly feel like I am home." That was not some stupid slogan, its how I feel.

AA has its share of problems, and I have little respect for its management team, but to wrongs don't make a right. I have flown EMirates, and BA, and a host of others, and I never feel at home when I fly those airlines until I have landed in the U.S. and gotten off the plane.

Finally, NO ONE, and I mean NO ONE rewards loyalty like AAdvantage Program. Its far from perfect, but when compared to others, its light years ahead.

I understand the unions need to protect themselves, but the grass is not always greener.......TRUST ME.

Cheers,
777 / 767 / 757

Another excellent post. I have the same feelings for Delta and its people that you do American. As someone who loves and respects the history of the industry though, the thought of the storied American Airlines being transformed into an LLC and sucked dry by US makes me ill. I hope that American employees will fight like the Delta people did at being assimilated by US Airways.

Though Delta has made squawks about purchasing AA, but I think they are just squawks. I am not one to see any airline go down or be merged any longer. When competition suffers, all suffer. There is no free market economy in America. That is a joke. The government will probably just look the other way with anti-turst concerns, as it so often does. I was not even thrilled that Delta merged with Northwest. I wished that NW had stayed on its own. Though I had reservations it would work out too well, things seemed to be going pretty good at DL with NW. Can one say that for US with HP, that still have yet to merge fully? Nope!

One thing negative I will say for AA is that, if I believed in karma, I would say what they did to TWA is coming back and hitting them like a brick in the forehead, if they allow US to get them.

That being said, I hope "Your American, Stays American!" I hope that when you see that AA and eagle you will always feel your home. That is the way IT should be. How many more of us are out there who that way about our favorite airlines? Management? Unions? Knock, knock, anyone listening?

 

[Vortilon]

Another excellent post. I have the same feelings for Delta and its people that you do American. As someone who loves and respects the history of the industry though, the thought of the storied American Airlines being transformed into an LLC and sucked dry by US makes me ill. I hope that American employees will fight like the Delta people did at being assimilated by US Airways.

Though Delta has made squawks about purchasing AA, but I think they are just squawks. I am not one to see any airline go down or be merged any longer. When competition suffers, all suffer. There is no free market economy in America. That is a joke. The government will probably just look the other way with anti-turst concerns, as it so often does. I was not even thrilled that Delta merged with Northwest. I wished that NW had stayed on its own. Though I had reservations it would work out too well, things seemed to be going pretty good at DL with NW. Can one say that for US with HP, that still have yet to merge fully? Nope!

One thing negative I will say for AA is that, if I believed in karma, I would say what they did to TWA is coming back and hitting them like a brick in the forehead, if they allow US to get them.

That being said, I hope "Your American, Stays American!" I hope that when you see that AA and eagle you will always feel your home. That is the way IT should be. How many more of us are out there who that way about our favorite airlines? Management? Unions? Knock, knock, anyone listening?

Just like to point this out. It's not HIS American! In case you two history buffs, pining away for the days of old, hadn't noticed - the airline industry has gone to hell in a handbasket.

You want the AA employees to fight like hell? To support Tom Horton the resident carpet bagger and his cadre of overpaid yes men. Only to be locked into a 6 year, morale busting, POS contract! No freaking thanks!

 

[777 fixer]

Just last evening I saw on a union leader say that US promised NO jobs would be lost, not one. Really?! What kind of kool aid does Parker serve?

link: American Airlines unions back U.S. Airways merger

It seems that the APA, APFA and TWU are more than willing to drink it.

 

[Frank Szabo]

It seems that the APA, APFA and TWU are more than willing to drink it.

... mainly because it becomes a "poison pill" for AMR "management".

 

[WorldTraveler]

In 2003 we (the employees) made what has turned out to be a nine year investment in keeping AA a stand alone carrier, now they want even bigger concessions. Time to write it off. USAIR is by no means a "white knight" but the team we have in place must go. Like I said before if the best they can do, the only way they can survive, is for us to subsidize their plan then I'd rather see AA liquidate, well this is merely an alternative to both.

While I understand your frustration and completely agree that AA mgmt wasted the advantage they gained with the 2003 concessions and then spent 8 years trying to “peacefully” get more while the industry around AA changed, history shows that the vast majority of employees will show up for work even after the pay cuts. And because the majority of AA’s labor costs are based on cutting heads and benefits and altering productivity rules, the majority of the AA people who stay will be more likely to believe it is worth their while to stick it out than to leave.
People are far more likely to revolt against direct pay cuts than to benefit and productivity cuts – which is why AA is trying to minimize the salary cuts to the employees who remain.
Of course, their philosophy is completely contrary to what unions want which has been to retain lots of employees even if they are lower paid… but as benefits costs continue to rise, it is no longer feasible to keep hundreds of extra employees at the company and trade it for salary cuts.
The sole reason why the unions are so aggressively supporting US’ takeover proposal is because Parker is promising to reduce the number of lost jobs – and thus further weaken the unions.
The majority of employees will show up the day and the week and the month after the 1113 cuts are imposed and benefits and productivity are slashed…. When there is somewhere between 15-20% unemployment in the US (depending on whose calculations you believe tell the real story), the majority of employees are not going to give up a job without knowing something better is in the bag.

Sure, everyone can come up with lots of money, but at the end of the day, the real value is in access to established paying customers and the systems that convey them.

But here is the rub… AA has those high value passengers right now throughout its network… US has them only in its Eastern hubs – DCA, PHL, and CLT… but US doesn’t do well in competing for high value passengers outside of its eastern hubs against larger airlines.
So, AA employees would be giving up the premium revenue passengers that are the backbone of AA’s business plan to share them w/ US who hasn’t been able to generate them on their own.

Though Delta has made squawks about purchasing AA, but I think they are just squawks. I am not one to see any airline go down or be merged any longer. When competition suffers, all suffer. There is no free market economy in America. That is a joke. The government will probably just look the other way with anti-turst concerns, as it so often does. I was not even thrilled that Delta merged with Northwest. I wished that NW had stayed on its own. Though I had reservations it would work out too well, things seemed to be going pretty good at DL with NW. Can one say that for US with HP, that still have yet to merge fully? Nope!

No one should doubt that DL is in a position and will move to acquire AA if it has to – and if it does make a proposal, it will be able to show that it can generate superior returns to the creditors and for the employees. Like it or not, but DL is a larger airline that already is more like AA than AA is like US… thus adding key pieces of AA’s network to DL’s will create more benefits for the combined airline than will happen with AA/US.
.
More on revenue later, but everyone (including Parker) want to forget that the Dept. of Justice made it fairly clear that it will not allow US to acquire any more slots at DCA – so if US acquires DCA, it will be forced to operate AA’s routes from DCA using US’ existing slots while the remainder of AA’s slots – dozens of flights per day – will end up in the hands of a competitor – and possibly a low fare carrier like WN that could easily eliminate all of the potential merger benefits by reducing fares.
.
It has been suggested several times that DL would be in a worse position or be viewed as more hostile but several articles suggest that DL is already working w/ non-airline US based investors who would be able to facilitate a sale of the overlapping parts of the DL-AA networks in NYC – where overlap would be problematic – to another airline.
We could debate all kinds of scenarios about what AA-DL would look like but i am certain that DL could come up with a superior deal for all parties to what US could propose and still not run into the anti-trust issues which a lot of people think would stop DL participation in a deal.
And there would still be other offers that would come, including likely from BA/IAG partnered with domestic investors.
.
And of course the unions haven’t seen any other deal to know if it they would make sense or be superior to US’.
.
And it also doesn't change the fact that US has not demonstrated that it can provide a better deal - or even a workable one - superior to AA"s standalone plan. All US has done is promised that it will reduce the labor cuts AA is proposing but US has not even begun to demonstrate how they will do that.... and all kinds of evidence indicates they are making promises they cannot keep.

 

[USFlyer]

Parker says he is avoiding the mistake of not getting labor onboard in the DL takeover attempt but he still has to come up with a viable business plan -something he did not do for DL since the creditors decided that DL would be better off as a standalone entity... history shows they are right.

Not quite. DL bought NW, nearly doubling in size. DL hardly remained a "standlone entity".

I'm very confident US has run the numbers and has a business plan for the combined entity. That's kept very confidential, though, and won't be released anytime soon. Say what you will about US, its senior execs are very analytically driven and therefore I'm sure have a good model of what the combined entity would look like with respect to revenue, cost, margin, etc.

 

[FWAAA]

Not quite. DL bought NW, nearly doubling in size. DL hardly remained a "standlone entity".

Delta emerged from Ch 11 as a "standalone entity," and that's clearly what WT was talking about. Sure, it later merged with NW, but not during bankruptcy. Yes, some believe that the merger was pre-arranged, but when the DL creditors voted to go it alone (without US) there was nothing binding about the merger with NW.

I'm very confident US has run the numbers and has a business plan for the combined entity. That's kept very confidential, though, and won't be released anytime soon. Say what you will about US, its senior execs are very analytically driven and therefore I'm sure have a good model of what the combined entity would look like with respect to revenue, cost, margin, etc.

I agree with you. And I'm just as confident that AA management has "run the numbers" and has a viable business plan for emerging from Ch 11 as a single, unattached airline, not married to US. And AA's unsecured creditors will have to decide whose plan yields more money for them - the standard in Ch 11.