Here comes the BK threat from the company

[OldGuy@AA]

The sad truth is that American is no longer run by airline people. All those are gone. We are run now by bean counters and marketing. These clowns don't know how to run an airline.

 

[FrequentFlierCA]

The sad truth is that American is no longer run by airline people. All those are gone. We are run now by bean counters and marketing. These clowns don't know how to run an airline.

But apparently they do know how to run a business without going bankrupt.

What a concept for the airline industry.

 

[Hopeful]

But apparently they do know how to run a business without going bankrupt.

What a concept for the airline industry.

I guess bilking thousands and thousands of employees out of billions had nothing to do it, eh. FFCA?

 

[commavia]

What should AA have done? Cut, cut, cut but kept wages and benifits as they were. Those who were laid off would have had a good job to come back to. We would have seen more guys retire. Their dependability would be up there with SWA and more than likely their profits would as well. They would have had a motivated workforce instead of a demoralized defeated one.

Delta makes more than we do, United Mechanics just rejected a TA that was better than the one we rejected, those are the only two surviving legacy carriers, NWA was bought by Delta and CAL was bought by UAL. The UAL contract was a carbon copy of the CAL agreement that pushed through by workers in Houston who apparently were looking for some merger protection language. Jet Blue tops out at $40/hr, we top out over $6/hr less. We wont go into SWA or UPS but the fact is that their structure never changed and at best they kept pace with inflation.

Interesting points - thanks.

So on the subject of what AA should do now, going forward, and speaking only of M&E - should AA now take the path that Delta, United, AirTran, Frontier, etc. have (apparently) taken - outsource overhauls to third parties and/or foreign countries, and use part of the savings to raise the wages of the line folks? Will TULE/AFW ever be competitive on cost with where Delta, United, AirTran, Frontier, etc. now do overhauls (TIMCO, HAECO, Aeroman, etc.)? If not, maybe the solution is to "cut, cut, cut" off the piece of M&E (MBV) that will never be cost-competitive, and instead focus on motivating/improving/investing in line M&E? Would that ever pass ratification?

 

[Birdman]

Would that ever pass ratification?

Exactly 50% of title 1 is in TULE and AFW. Sure, exclude AFW from the ax and TULE is gone. Does AA want to lose control of its narrow body maintenance? I think not. Let new aircraft and attrition flush the topped out AMTs from the payroll, shore up productivity, and AA saves...........billions?

 

[Bob Owens]

Interesting points - thanks.

So on the subject of what AA should do now, going forward, and speaking only of M&E - should AA now take the path that Delta, United, AirTran, Frontier, etc. have (apparently) taken - outsource overhauls to third parties and/or foreign countries, and use part of the savings to raise the wages of the line folks? Will TULE/AFW ever be competitive on cost with where Delta, United, AirTran, Frontier, etc. now do overhauls (TIMCO, HAECO, Aeroman, etc.)? If not, maybe the solution is to "cut, cut, cut" off the piece of M&E (MBV) that will never be cost-competitive, and instead focus on motivating/improving/investing in line M&E? Would that ever pass ratification?

Who says that there would be savings? Who says they aren't competitive now? Sure labor costs may go down but eliminating the bases does not eliminate the work, it still has to be done and UAL actually saw their maintenance costs go up when they outsourced, if AA jumped into that market that would just send up rates that MROs charge even higher. Wages will be going up in those places due to the fact they are one of the first to be impacted by shortages of mechanics. AA is actually in a very favorable position, they have a huge reserve of experienced mechanics from which they will try to draw from .

 

[Boomer]

As Bob stated, costs go up but more importantly: the company has to use cash to pay those expenses.

 

[Super FLUF]

Ourpay and Horton are meeting with the APA BOD tomorrow.

What a hoot that would be to listen to. Let me guess....if it weren't for us costly labor bricks, we would be making TONS of money!

 

[WorldTraveler]

Thanks, Kev.
Yes, my brother is fully capable of understanding and digesting what is going on at AA… his greatest frustration is that there seems to be no direction and no answers from anyone, including about the future of his job… like a lot of folks with 23 years, he is now a lifer and would like to be able to walk away from AA when HE wants.
It might also be noted that while AA COULD choose to outsource a lot of their below wing ramp operations, it will still have to be to people being paid US dollars who reside in the United States. That may or may not be the case with maintenance.
Just a thought to consider when trying to pit one part of the AA TWU-represented workforce against another.

Being a numbers kind of guy, let me throw a few pieces of data out here, let some of the people here who understand the business of aviation maintenance respond to them, and develop a proposal that might serve as one alternative that AA COULD pursue.
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According to data which each airline files with the DOT, AA spends approximately 1.6 cents on maintenance for each mainline ASM they generate. AA has the highest maintenance costs per ASM of any of the US network airlines.
UA spends about 1.35 cents per ASM on maintenance which is very close to the industry average for all airlines. Pre-merger CO had similar maintenance costs/ASM.
DL spends right at 1 cent per ASM on maintenance and has one of the lowest costs in the industry, including low fare carriers which contract nearly all of their maintenance.
Note that these figures are for maintaining their OWN FLEETS… they do not include revenue or costs associated with insourced maintenance.


Looking at the two extremes in maintenance costs/ASM,
AA generates about 150 billion mainline ASMs per year which means they spend about $2.4 billion per year on maintenance.
DL generates about 200 billion mainline ASMs per year which means they spend about $2.0 billion per year on maintenance.
DL says that they are the largest airline based MRO in North America and obtain about $500 million in revenue for insourced maintenance.
At one time, I believe AA and DL had fairly similar amounts of insourced maintenance revenue – about $300-350 million per year. I believe I have read that AA’s insourced maintenance revenue has declined in recent years.
Going with the $500 million in insourced revenue and $2B in maintenance costs for its own fleet, DL insources about 25% of what it spends to maintain its own fleet. It would seem that DL obtains one of the highest absolute dollar amounts of insourced revenue and the highest percentage relative to its own maintenance costs.
Let’s go with the $350 million per year figure for AA and the $2.4 B for maintaining its own fleet. AA then obtains/obtained insourced revenue equal to about 15% of its total costs to maintain its own fleet.
……
I am less familiar with what UA has in terms of maintenance capabilities at this point but I would certainly say that AA and DL have the capability to perform just about any aviation maintenance related function they wanted to… I would guess UA is in the same position. Not sure how many other North American airlines have the capability to do full service maintenance or not, even if they choose not to do so.
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Obviously there are huge costs associated with being a maintenance operator. While the costs and revenues from insourced maintenance are kept separate, there are ECONOMIES OF SCALE that are realized from insourcing that help to reduce costs for an airline’s own internal maintenance operation.
Then,
AA does nearly all of its own maintenance in-house (not all but most), has the highest maintenance costs/ASM and is able to obtain insourced revenue equal to about 15% of its overall maintenance expenses.
During bankruptcy, DL rejected leases on many of its maintenance facilities and hangars spread through the country – apparently at the same time that they decided to outsource much of their overhaul maintenance, keep component and engine maintenance in-house, and aggressively market their in-sourcing capabilities.
DL has the lowest maintenance costs/ASM continues to actively develop its insourcing business – including its recent announcement of a “maintenance joint venture with AM that will allow Mexican facilities to focus on overhauls and DL to focus on engines and components.
…..
Is it possible that DL’s strategy is in part what has allowed them to reduce their own internal costs, pay the maintenance personnel they have kept higher wages, and also allowed their maintenance operations to become one of the highest margin sources of insourcing business for DL?
….
Is it not possible for AA to consider some of what DL has done?
…..
Finally, consider the impact that DL’s maintenance insourcing contracts have on development of its passenger business.
Royal Air Maroc, IIRC, is one of DL’s oldest maintenance customers, perhaps leading to DL’s development of a passenger codesharing arrangement with them. DL only codeshares with Royal Air Maroc but they have a relationship with an airline in North Africa – perhaps in part due to the maintenance relationship.
Sun Country was one of NW’s cross-field competitors at MSP. I’m not sure when SY became a DL Tech Ops customer but it isn’t lost that part of DL’s decision to maintain and reopen some maintenance capabilities at MSP is to service contract customers including SY.
….
AA and DL both have recently developed passenger service partnerships with GOL Airlines of Brazil, one of the largest 737NG operators in Latin America. DL says that it desires to deepen its relationship with GOL and recently announced that DL has won contracts to overhaul at least half of the engines that power GOLs fleet. In term, DL is helping GOL become certified as an FAA approved maintenance facility, presumably also to take advantage of the downtime that exists on aircraft flying to Brazil in order to do maintenance.
Is it possible that DL’s maintenance partnerships could help them provide better terms on their passenger relationship?
…
Lots of questions to consider… lots of data that isn’t known but what is known is that insourcing of the right functions can be a powerful tool to reduce costs and even help the passenger business.

Frank,
I do not know the specifics of where AA's labor force is less productive than other carriers. It has been reported that DL does its maintenance work w/ alot fewer mechanics as a result of being non-union. I don't know... but I am certain that there is likely some non-union benefit.
It is also possible that by focusing on fewer areas of work that DL's productivity is higher than AA's because they specialize on doing only certain things... don't know that to be a fact but it's a theory I'll throw out for discussion.
..
Not specific to maintenance alone, but NW focused on productivity long before other carriers did... even though they were heavily unionized. So, high productivity is not necessarily incompatible with being heavily unionized..... there are PMNW people that frequent this board that will attest to how productive they were relative to other carriers.

 

[737823]

What should AA have done? Cut, cut, cut but kept wages and benifits as they were. Those who were laid off would have had a good job to come back to. We would have seen more guys retire. Their dependability would be up there with SWA and more than likely their profits would as well. They would have had a motivated workforce instead of a demoralized defeated one.

Delta makes more than we do, United Mechanics just rejected a TA that was better than the one we rejected, those are the only two surviving legacy carriers, NWA was bought by Delta and CAL was bought by UAL. The UAL contract was a carbon copy of the CAL agreement that pushed through by workers in Houston who apparently were looking for some merger protection language. Jet Blue tops out at $40/hr, we top out over $6/hr less. We wont go into SWA or UPS but the fact is that their structure never changed and at best they kept pace with inflation.

The arguement always falls back to OH, and leaves out the fact that AA always enjoyed a labor cost advantage over their competitors. Well the company has never stated that doing OH in house, with OSMs and other low cost Title 1 workers was more costly than outsourcing, and their behaviour over the last six years would indicate that it was not. seperate

Bob, in seriousness if the interests of your members in overhaul are not aligned with line stations wouldn't the membership be better served with separate TAs and collective bargaining agents? Perhaps I'm missing something (or a big part of the picture) but it seems the line mechanics in BOS, NYC, etc are getting the short end of the deal here while Tulsa has pull from its numbers. In the on YouTube last summer you discussed concerns with the divisiveness of the company proposals and separating line and overhaul. If their interests are so far apart why wouldn't the membership be better served with a TA and/or union altogether?

Josh

 

[TWU informer]

Bob, in seriousness if the interests of your members in overhaul are not aligned with line stations wouldn't the membership be better served with separate TAs and collective bargaining agents? Perhaps I'm missing something (or a big part of the picture) but it seems the line mechanics in BOS, NYC, etc are getting the short end of the deal here while Tulsa has pull from its numbers. In the on YouTube last summer you discussed concerns with the divisiveness of the company proposals and separating line and overhaul. If their interests are so far apart why wouldn't the membership be better served with a TA and/or union altogether?

Josh

The National Mediation according to the Railway Labor Act does not allow for seperation of Craft or Class union members.

The division is clear, and it has not all happened as a result of company minds! We have screwed ourselves!!!!

 

[Frank Szabo]

... snip

Frank,
I do not know the specifics of where AA's labor force is less productive than other carriers. It has been reported that DL does its maintenance work w/ alot fewer mechanics as a result of being non-union. I don't know... but I am certain that there is likely some non-union benefit.
It is also possible that by focusing on fewer areas of work that DL's productivity is higher than AA's because they specialize on doing only certain things... don't know that to be a fact but it's a theory I'll throw out for discussion.
... snip

I've asked that question re: productivity many times of the management crowd and you're the first to give an honest answer - ie, none of you fellers have a clue. I guess it's very much like pornography in that you guys can't define it but you know it when you see it - is that the situation? To continually harp on an issue that by your admission and that of others can't be readily defined isn't much more than speaking to break the silence - not a good idea when your facts aren't in line.

 

[Buck]

Thanks, Kev.
Yes, my brother is fully capable of understanding and digesting what is going on at AA… his greatest frustration is that there seems to be no direction and no answers from anyone, including about the future of his job… like a lot of folks with 23 years, he is now a lifer and would like to be able to walk away from AA when HE wants.

Yes I am sure that your brother is capable of understanding and digesting what is going on at AA. As I stated I do not believe a member of Fleet Service understands the maintenance portion and a member of Maintenance does not understand the Fleet Service side. All that Fleet Service does to keep the airline afloat, the conditions they work in and management that has no clue. It could be that in Fleet Service that management has a clue? But I have seen first hand that in maintenance, management is lacking. It is obvious that the airline is ran by finance. Maintenance cannot acquire the equipment needed to work on the aircraft. I am pretty sure that Fleet Service is also lacking in the equipment they need. I too, am a lifer with 27 years and would like to be able to walk away when I want. Again no disrespect to your brother, I hope he fares well.

 

[chris perry]

The problem here is AA maint is like a car dealership runs things.The total cost of facilities,vehicles including FS is all bundled into maint costs... I worked at a dealership for years and reviewd the books monthly.Maint always paid all the bills.... The sales bosses always reaped the bonus..They always complained Maint cost were too high same story here...Its a matter of where the money is funneled. If We had a record month in maint it would disappear like poof......Under customer service costs etc...It never came out of sales buget.It really didnt matter we all recieved a micro bonus and sales took thousands month after month...

 

[WorldTraveler]

. I too, am a lifer with 27 years and would like to be able to walk away when I want. Again no disrespect to your brother, I hope he fares well.

no disrespect construed.... I and he wish you well also.
.
Frank,
As you well know, airlines release enormous amounts of information that other industries would never dream of sharing w/ the public.... some of it is due to outdated gov't regulations that dictate that the public needs to know the intimate details of airline operations even if they don't understand it - not unlike what public utilities have to provide to justify their rates. Washington hasn't gotten the message that the airlines are deregulated and that people don't need to know everything that goes up "under the hood" at the US' airlines.
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But the information is there... other information is derived from data that is released to the public as part of SEC disclosure regulations - and not much different from what other industries have to report... and then there is a 3rd part of data - that comes from data that airlines share w/ each other.
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As you know, airlines voluntarily share alot of data about their operations with each other - and with trade organizations - that provide fairly detailed information on the industry as a whole is doing... ie although all airlines don't report monthly RASM, they do provide it to the ATA which consolidates the information, masks it sufficiently to protect those airlines that don't want to report - including w/ more detail than even airlines that do report monthly share.
And then the ATA redistributes the information to the airlines who then can tell how they are doing relative to the industry; and the information is also provided to Wall Street analysts who pass judgment whether airline plans - pricing/capacity plans - stack up w/ industry data.
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Airlines also exchange information on their productivity, best practices, maintenance, on-time performance, etc... as I'm sure you know.
It is with this exchanged information that airlines have a pretty good idea about how many employees they have doing the same type of work…. And how productive those employee groups are….
It is this type of information that airlines use in labor negotiations….
So, yes, there are limits to why I as an outsider can know… I don’t have access to the airline specific information although AA might be telling UA some information that is not reported publicly… so it is difficult to be able to say exactly where the productivity differences are between airlines…..
Although someone who knew the business at one airline (ie labor leaders) should be able to find contacts at other carriers who can help determine the competitiveness of one group at another airline.
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However, there is enough publicly available information at a macro level to know that AA is not competitive in terms of productivity…. It is possible that AA’s labor contracts do not allow some of the productivity other carriers have, it is possible that AA is not working to the limits of what its labor contracts allow, and it is also possible that AA is still overstaffed based on the size of the airline because AA did not reduce staffing as much as airlines that restructured in BK….
Regardless of the reason, I believe it would behoove the TWU to find out as great as possible exactly where AA maintenance productivity falls relative to other carriers and what is driving those differences… I may be wrong, but I don’t get the sense that there is a desire to figure out why the company is asking for what it is asking… and where the TWU should agree and where it should not.
The reality is that other companies do some things better than AA in some areas –and AA does things better than other companies in other areas.
AA mgmt knows what each of those areas are… the TWU needs to know as well.
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If the company has information but the TWU does not, how can there be fair negotiations?

-----

yes, Chris, while there are industry standards about how revenue is divided between a ticket, there is nothing mandatory about how costs need to be allocated other than what would pass an audit - and the main theme there is that costs have to be shown somewhere and the methdology generally has to be consistent across time.
If AA carries a passenger from JFK-GIG, JJ carries them GIG-EZE, and AR carries the passenger EZE-SCL, then everyone has to agree as to how the revenue will be shared in that ticket....
but no such standardization exists for allocating revenue, either within multiple companies or even within the same department of the same company. Therefore, you have to view costs within the context of the larger picture... and also track CHANGES as much as the absolute number.
Still, there is enough consistency on higher levels of how costs are accounted for in order to meet international accounting standards that there is some basis for comparison.....
but once again, if the company knows more than the party on the other side of the table, you will never win in any negotiations.