OutSourcing--- A Viable Concept?

[Bob Owens]

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

I've been in this industry for more than five years, you guys started this latest wave of massive concessions by believing your CEO when he said that if you give me what I want now I wont come back for more. "Give him a chance". Well you gave , they took and then they kept on taking, just like I said they would. Where were you then BB, were you a "Lets give him a chance guy" or were you one of the Vote NO guys?

Prior to that US paid very well by industry standards. In fact from the late 80s up until around 2000 US was a top payer, I know because a lot of guys that I started with quit and went to US because of the higher pay. I stayed because seniority was critical and the airlines used to leapfrog each other, so sure US paid more now but the next contract(back then 2 year contracts were the norm) we would top them.

It didnt work out that way but for most of my tenure US made more, but even at that I wouldnt say that they made "Extra", this industry has lagged in pay for a long time.

 

[BoeingBoy]

Where were you then BB, were you a "Lets give him a chance guy" or were you one of the Vote NO guys?

I was there for all of the "then's" - like I said in an earlier post the concessions started in '92 under Schofield and every management team after that wanted more. And I certainly remember the mechanics, rampers, agents, etc (who had already taken concessions) urging "just sign a contract so we can get on with business". At least Siegal and Lakefield didn't promise how rosy things would be if everyone gave them what they wanted, but then again they had the bankruptcy court on their side so didn't need to.

And no, I wasn't one of the "Let's give him a chance" guys - the last contract/LOA that I voted "yes" on was when the airline I worked for was called Piedmont. Of course, the flip side of my "no" vote is that if the concessions hadn't occurred I may have been looking for a job at 50 instead of retiring at 60. As I've said in the past, US (the original) was a high cost airline depending on high yields to make a profit and that continued through the various mergers - being among the best paid in the industry carried a cost. Every time the economy turned south - '90-91, 2000-2003ish - US would start losing money before the other legacies and return to making profits after the other legacies (in the two decades starting with 1989 there have been 4 or 5 years of profits for US). As WN covered more of the country, yields suffered and US cut off parts of it's system in the effort to stay afloat. West coast, intra-Florida, the northeast were affected in sequence so by 2000 US was back to little more than the core of the original US network - losing money nearly the entire time (there were a couple of profitable years in the late '90's) and the size it was before the mergers in '88/89. Without concessions it's entirely possible that US wouldn't have been around to visit BK twice this century.

Jim

 

[Barfbag]

Outsourcing Maintance and ramp would be the best. Agents, along with res. agents are the first contact that a customer has with an airlines and they could care less about who works on the airplane.

Passengers only look at price, most of our bookings are Internet related. There is no brand loyalty. AA, UA, it's all a con game to most passengers, fees for this and that.

Passengers don't care who sells them their snacks onboard, or who or what is in the cockpit. They just cry, when the find out their neighbour flew between ABC and XYZ for $.50 less than they did.

The bottom line is that unless the Government steps in and regulates pricing, your job could be next to go.

It's all about bringing pricing down and profits up.

 

[WingNaPrayer]

I've been an advocate of re-regulating the industry for years but no matter how beneficial it may appear, it will still be a tough pill to swallow and most, if not all carriers, would oppose it. In the days of regulation, barely a fraction of the people who travel by air today, did so then. Deregulation created this big monster we now know as the airline industry, and did so without a leash or collar. Smaller and less financially secure airlines either got swallowed up whole or trampled into the dust and even with less carriers, the airlines still couldn't find a way to sell a ticket at a decent profit. Remember the gloom and doom days when all the carriers thought People Express would tarnish and destroy the industry, while they tripped over themselves to compete at PE prices? It's all happening again with the start ups, and I am anticipating the bankruptcy and liquidation of at least 7 carriers by mid 2010, and the government will prop up the big guys because the little ones who might survive don't have the capacity to pick up the slack.

AA is no different than any other carrier right now in that they are putting a lot of their faith regarding future profits in the "blue sky" portion of their business models. Crapping on labor and letting the bread and butter customers break all the rules is not the way to do it. In this business, sometimes you just have to park some planes rather than give the seats away at Dollar Store prices, it's nuts to let your aircraft get beat to hell for fares that barely, if at all, pay for the fuel to get it off the ground. The cheaper the fares, the trashier the customer, and trashy customers don't give a rat's ass what they do to your aircraft. They believe their $19.95 entitles them to whatever they want.

At some point we are just going to have to give in and let the airlines collaborate on pricing. Refer to it by all the nasty names you like but it may be one of the only ways to save the industry and all the jobs that go with it.