OutSourcing--- A Viable Concept?

[Winglet]

Pilots, dispatchers, and maintenance are critical to everyday operating safety. These are functions that must be closely monitored and controlled. The rest of the jobs at the airline, while affecting the bottom line, aren't likely to result in smoking holes and carnage on the evening news.

I've seen some pretty horrid things go on under "contract" maintenance. What a lot of the public doesn't know is that work at a lot of these foreign (and some domestic mx slop-shops) is done by unlicensed (Deleted by Moderator: ethnic and racist slur) labor, supposidly under the supervision of a FAA-licensed mechanic.

And forget the FAA. They're spread WAY too thin to adequately monitor a shop. It's really up to the integrity of the company to maintain standards itself.

What AA management would like to do is run a virtual airline, not a real one, but at least now, I have confidence in skill and fidelity of our own mechanics.

 

[AA767JET]

Pilots, dispatchers, and maintenance are critical to everyday operating safety. These are functions that must be closely monitored and controlled. The rest of the jobs at the airline, while affecting the bottom line, aren't likely to result in smoking holes and carnage on the evening news.

I've seen some pretty horrid things go on under "contract" maintenance. What a lot of the public doesn't know is that work at a lot of these foreign (and some domestic mx slop-shops) is done by unlicensed (Deleted by Moderator: ethnic and racist slur) labor, supposidly under the supervision of a FAA-licensed mechanic.

And forget the FAA. They're spread WAY too thin to adequately monitor a shop. It's really up to the integrity of the company to maintain standards itself.

What AA management would like to do is run a virtual airline, not a real one, but at least now, I have confidence in skill and fidelity of our own mechanics.

Thank You WingLet very well put...

 

[AANOTOK]

"Thank You WingLet very well put... "

Yes it was Winglet, yes it was!

 

[BoeingBoy]

We are aware of the concept that outsourcing is "cost effective"

We also know about various departments being outsourced.. Like Ramp Services, Agents, Aircraft Maintenance, Cargo, Customer Service, Reservations.

But why not the Pilot and Flight Attendant groups?

While I agree with what someone else posted - all groups are important and no single group is entitled to special treatment - with pilots and flight attendants you have one big problem - the FAA requires them to have pretty comprehensive airline specific training. If either of two things ever happen - all airlines operating a given airplane have exactly the same configuration and use exactly the same procedures or an outside company is willing to pay the cost of that airline specific training - you'll see the outsourcing of pilots and flight attendants start.

Besides, in a way the outsourcing of pilots and flight attendants has been happening in the industry (just not as much at AA as at other carriers) - turning flying over to regional affiliates. US had done the most, going from less than 5% of available seat miles flown by regional operators (all with turboprops) to having nearly 15% of ASM's flown by regional operators. As measured by flights, US now has about 2 flights operated by regional affiliates for every mainline flight.

Jim

 

[Bob Owens]

Besides, in a way the outsourcing of pilots and flight attendants has been happening in the industry (just not as much at AA as at other carriers) - turning flying over to regional affiliates. US had done the most, going from less than 5% of available seat miles flown by regional operators (all with turboprops) to having nearly 15% of ASM's flown by regional operators. As measured by flights, US now has about 2 flights operated by regional affiliates for every mainline flight.

Jim

Eagle has their own Gate agents, mechanics and Fleet service as well.

 

[BoeingBoy]

Eagle has their own Gate agents, mechanics and Fleet service as well.

I didn't mean to imply otherwise - if I did it was my mistake. At least AA, unlike US followed by DL, has a relatively small regional operation as measured by ASM's or flights relative to mainline. Let's hope it stays that way.

While I'm posting, I wanted to talk about your revenue split - 1/3 for the employees, 1/3 for fuel, and 1/3 for the company. Sounds good in theory - $8 billion of last year's $24 billion in revenue goes to employees ($1.34 billion more than actually went to employees). However, fuel consumed it's 1/3 and then some - an extra $1 billion to be exact. That leaves the company short of getting their 1/3 - they only get $7 billion to pay all the other costs of operating the airline, from planes to bag tags and everything in between. Those totaled $8.8 billion. Which vendors don't get paid because the company's share of the revenue pot was $1.8 billion short of what was needed to pay the bills?

Let's look at the first 6 months of this year (this week we'll have figures for the first 9 months). Revenue was $9.7 billion (over $2 billion less than last year). To give the company a break, let's say that the employees get $3.2 billion (a little under 1/3). Again, unfortunately, fuel consumed more that it's 1/3 - nearly $3.4 billion total. That leaves the company short again with only $3.1 billion to pay those other costs of running the airline. Those other costs add up to nearly $3.6 billion. So which vendors do you not pay to make up the half billion dollar shortfall?

Jim

 

[Bob Owens]

I didn't mean to imply otherwise - if I did it was my mistake. At least AA, unlike US followed by DL, has a relatively small regional operation as measured by ASM's or flights relative to mainline. Let's hope it stays that way.

While I'm posting, I wanted to talk about your revenue split - 1/3 for the employees, 1/3 for fuel, and 1/3 for the company. Sounds good in theory - $8 billion of last year's $24 billion in revenue goes to employees ($1.34 billion more than actually went to employees). However, fuel consumed it's 1/3 and then some - an extra $1 billion to be exact. That leaves the company short of getting their 1/3 - they only get $7 billion to pay all the other costs of operating the airline, from planes to bag tags and everything in between. Those totaled $8.8 billion. Which vendors don't get paid because the company's share of the revenue pot was $1.8 billion short of what was needed to pay the bills?

Let's look at the first 6 months of this year (this week we'll have figures for the first 9 months). Revenue was $9.7 billion (over $2 billion less than last year). To give the company a break, let's say that the employees get $3.2 billion (a little under 1/3). Again, unfortunately, fuel consumed more that it's 1/3 - nearly $3.4 billion total. That leaves the company short again with only $3.1 billion to pay those other costs of running the airline. Those other costs add up to nearly $3.6 billion. So which vendors do you not pay to make up the half billion dollar shortfall?

Jim

Thats not my problem. Thats managements problem, isnt it?

The airline industry is a service industry, most of the expense should be labor because the service thats provided is the product of our labor. Except for fuel the materials are reused over and over again. When a passenger pays $800 for "a seat" they dont take the seat home with them.

 

[FWAAA]

Thats not my problem. Thats managements problem, isnt it?

The airline industry is a service industry, most of the expense should be labor because the service thats provided is the product of our labor. Except for fuel the materials are reused over and over again. When a passenger pays $800 for "a seat" they dont take the seat home with them.

Thanks, Bob. Your first paragraph just made me $100; I placed a bet after BoeingBoy's post that your response would be "That's management's problem."

The counter-party said that there's no way a president of a union local would post such an out-of-touch response, but they haven't followed your posts as closely. Thanks again.

About your assertion that most of the expense should be labor: In 2002, AMR's total labor expenses were almost half of total revenues. Slightly less in 2003 (due to the concessions) and still more than a third in 2004. In the years since, labor's percentage fell as revenues recovered. Fuel expenses managed to eat up more than the labor savings in 2005-09.

So far in 2009, total wage expenses are again running more than one-third of revenues.

In years when revenues fall off (like 2002-05) and this year, should labor give back so as to keep total wage expense at only one-third of revenue?

 

[Bob Owens]

Thanks, Bob. Your first paragraph just made me $100; I placed a bet after BoeingBoy's post that your response would be "That's management's problem."

Well I'm not an adherent of Business Unionism. Its not my job to pretend to be an airline executive or tell them how to run the business. I'm a trade unionist. I'm not here to figure how they are going to pay us I'm here to figure how much I can squeeze out of them before they can replace us. We've tried that working together "partnership" approach for decades and things only get worse. It was one sided, there was no quid pro quo. We werent responsible for nor were we consulted prior to the purchase of other carriers, the expense of building new terminals all over the country that cost billions or any of the other boondoggles that management jumped into. Why should we accept lower wages to pay for those mistakes?

The third -third-third was just thrown out there in jest, I'm really more in favor of half for labor, and the other half to maintain the equipement to provide the service. Get rid of all those admirals lounges, first class etc, after all thats where we see the steepest revenue declines anyway, right?

The counter-party said that there's no way a president of a union local would post such an out-of-touch response, but they haven't followed your posts as closely. Thanks again.

Out of touch? Please, just because we dont see things how you want us to see them doesnt make us out of touch. Perhaps thats why workers are in such bad shape, people are so used to union leaders that allow themselves to take on managements problems instead of fighting for their members. They are more in touch with the difficulties the company claims they are facing than the difficulties their members are facing.

About your assertion that most of the expense should be labor: In 2002, AMR's total labor expenses were almost half of total revenues. Slightly less in 2003 (due to the concessions) and still more than a third in 2004. In the years since, labor's percentage fell as revenues recovered. Fuel expenses managed to eat up more than the labor savings in 2005-09.

My guess is that labor expenses, even with management included, are at their lowest level EVER as a percentage of revenues across the industry. Wages certianly are, after adjusted for inflation.

In years when revenues fall off (like 2002-05) and this year, should labor give back so as to keep total wage expense at only one-third of revenue?

Nope, we should be just like management in that respect.

 

[BoeingBoy]

Thats not my problem. Thats managements problem, isnt it?

Yes it is, and they got the employees to accept concessions. Yet you don't seem to like them doing their job either, so I just thought you might want a stab at it by choosing who gets stiffed while the employees get their 1/3.

My guess is that labor expenses, even with management included, are at their lowest level EVER as a percentage of revenues across the industry. Wages certianly are, after adjusted for inflation.

You'd probably be correct for most years. In fact, most years employees got more than 1/3 of revenues and occasionally approached 50% of revenues. So you could consider the current period as paying back all the extra you've received in the past.


Jim

 

[Bear96]

Its not my job to pretend to be an airline executive or tell them how to run the business.

Really?

You seem to spend an inordinate amount of time here doing just that.

 

[FWAAA]

Well I'm not an adherent of Business Unionism. Its not my job to pretend to be an airline executive or tell them how to run the business.

And yet you're constantly posting your views of AA's business mistakes and your suggestions for improving the business. Examples follow below.

I'm a trade unionist. I'm not here to figure how they are going to pay us I'm here to figure how much I can squeeze out of them before they can replace us.

Too bad you're not a member of a trade union. You guys ought to start one.

I have to hand it to you - I admire your ability to stay focused on demanding more despite the declining size of the pie.

We've tried that working together "partnership" approach for decades and things only get worse. It was one sided, there was no quid pro quo.

What about the 2001 contract? Wasn't that a relative success, especially considering the concessionary 1995 agreement?

We werent responsible for nor were we consulted prior to the purchase of other carriers, the expense of building new terminals all over the country that cost billions or any of the other boondoggles that management jumped into. Why should we accept lower wages to pay for those mistakes?

The funny part is that I think you actually believe that concessions were forced down your throat because of the alleged "mistakes" you list. And not because revenue and air travel demand fell through the floor in the wake of the horrors of September 11. You know, the event that devastated the revenue at every legacy airline and sent four of the six to the bankruptcy court?

The third -third-third was just thrown out there in jest, I'm really more in favor of half for labor, and the other half to maintain the equipement to provide the service. Get rid of all those admirals lounges, first class etc, after all thats where we see the steepest revenue declines anyway, right?

There you go again, more pretending to be an airline exec and telling them how to run their business.

Admirals Clubs are self-sufficient, or so I've been told. Membership fees and other revenues allow the clubs to pay for themselves.

First class? You were ranting about First Class even before demand for premium fares fell off last year. I'm not convinced that an all-coach international configuration is the best plan.

 

[Bob Owens]

You'd probably be correct for most years. In fact, most years employees got more than 1/3 of revenues and occasionally approached 50% of revenues. So you could consider the current period as paying back all the extra you've received in the past.


Jim

Not me, maybe you did but I never did see the "extra".

 

[BoeingBoy]

Not me, maybe you did but I never did see the "extra".

See any "extra" at US...you've got to be kidding. According to MIT's Airline Data Project AA's average compensation per employee has been better than US by a considerable margin ($5 to $15 grand a year), since 2005 (that was when the last concessions kicked in at US). In 2004, US employees were compensated better but not by as much ($3 grand/year) and in 2003 US and AA were virtually tied. What put US further up the compensation list post 911 was personnel reduction - US furloughed a larger percentage of the workforce than any other airline and those folks don't count in the compensation calculations. So while there were concessions, having such a large percentage of the workforce hit the street provided a lot of the savings the company wanted at that time.

If you look at average annual compensation per employee, AA was 4th highest of the 6 legacies in 2003 (virtually tied with #3 US), #3 in 2004, #2 in 2005, #1 in 2006, #2 in 2007, and #2 in 2008. Prior to 2003 AA was in the bottom half consistently. In other words, you're better off after the concessions, compared to your peers at the other legacies, than you were before the concessions. As painful as those concessions were, they weren't as painful as at the other legacies.

Jim

 

[Bob Owens]

And yet you're constantly posting your views of AA's business mistakes and your suggestions for improving the business. Examples follow below.

Only to people like you who insist that we are being unreasonable in asking for a fair wage.

Too bad you're not a member of a trade union. You guys ought to start one.

Trade union is a broad term, in our case its supposed to mean people in the transportation industry, thus "Transport Workers Union".

I have to hand it to you - I admire your ability to stay focused on demanding more despite the declining size of the pie.

Declining pie? Maybe this year compared to last but the pie was nearly $7 billion bigger in 2008 than it was in 2003 and there were 40,000 less of us. Its still likely to be around 4 or $5billion bigger than when we took the concessions. Sure fuel took a bigger piece in 2008 but just the fact that there are less of us should have meant that we all get a bigger piece, the fact that we didnt means that other parties did. As we lower our wages everyone else simply grabs more. Then theres the basic idea of raising fares enough to cover costs. $10 or $20 a ticket isnt going to make people cancell travel plans or let Grandma die alone. When they slapped the $20 fuel surcharge on people kept flying.

What about the 2001 contract? Wasn't that a relative success, especially considering the concessionary 1995 agreement?

2001 restored our wages as far as pay rates, so in that respect it was a success. I was satisfied with my wages at that time. In fact if you dig back and look at my posts I was in favor of doing everything we can to help the airlines get through the post 9-11 crisis. I knew there would likely be a reduction in headcount and I was willing to work less hours in order to keep people on payroll, but I was always against cutting my hourly wage. The bosses didnt see their benifits and base compensation reduced, why should we? In fact when AA did away with the title Supervisor and made them "Managers" they all got pay raises.

The funny part is that I think you actually believe that concessions were forced down your throat because of the alleged "mistakes" you list. And not because revenue and air travel demand fell through the floor in the wake of the horrors of September 11. You know, the event that devastated the revenue at every legacy airline and sent four of the six to the bankruptcy court?

BK was simply a business tactic to rip off the workers,the small time stock owners and maybe a few smaller vendors and the courts helped them do it. As far as I'm concerned we got the bankruptcy plan without going BK. Sure we still have the pension but then again that could change between now and the time I get to collect.

How much of a paycut did the workers at SWA take? Obviously that company managed their affairs correctly, they didnt build up their debt by buying other carriers, building taj Mahals all over the country and other ill fated ventures. The fact is that its managements job to prepare the company for economic downturns and they failed to do that, instead they just came after the workers.

There you go again, more pretending to be an airline exec and telling them how to run their business

Are you airline management? I thought I was conversing with a Southern California lawyer with an obsession with the chat sites. I'm telling you what they've done wrong in response to your claim that cutting our pay was their only option and I'm doing that because you are the one taking their side, claiming that revenues are down, and they cant afford to pay us. Revenues may be down from 2008 but they are still up from 2003 and there are 40,000 less of us. Surely you can see that if revenues even stay the same and you cut headcount by 40,000 that there will be savings and the workers should be able to get their pay restored, hasnt that been the promise of Capitalism since the Great Depression, "increased productivity results in increased living standards". We increased productivity and they want to lower our wages (in real terms) even more!

First class? You were ranting about First Class even before demand for premium fares fell off last year. I'm not convinced that an all-coach international configuration is the best plan.

Maybe not, Freddy Laker, Capitol, TransAmerica and others had it back in the 80s and they didnt last too long but then again domestically SWA does pretty well with it.

Like I said you pro management people come here, claim that you are neutral and not affiliated with management , make the companys arguement then when I respond to you and your claims say that I'm telling management how to run their business, so, since I'm responding to you that must mean that you are management.