Schnurman: American Airlines pilots need a reality check

[eolesen]

More bad news to rebutt Bob's flawed logic:

CO announced March RASM was down between 18.5% and 19.5% year over year.

Keep in mind capacity cuts have a positive benefit here if load factors stayed the same (which everyone says is the case).

I can't imagine that AA will fare much better (all pun intended).

 

[Hopeful]

More bad news to rebutt Bob's flawed logic:

CO announced March RASM was down between 18.5% and 19.5% year over year.

Keep in mind capacity cuts have a positive benefit here if load factors stayed the same (which everyone says is the case).

I can't imagine that AA will fare much better (all pun intended).

At least the executives will "fare" better.

 

[Bob Owens]

Your ATA numbers are fantasy. Don't know where you got them, when they were issued or whether you're correctly interpreting them.

It came out on an "ATA Smart Brief" a few weeks back. I believe the figure was specifically Domestic.

According to AA, consolidated capacity is down 10% yoy, and unit revenue (RASM) is down in the first quarter by a little more than 10% yoy. So you have about 90% of the ASMs each collecting only about 89.5% of the revenue from last year. Rounded, that's about 80% of last year's revenue. Read about it in the 8-K:

And? AA needs to lower their costs, we know that but labor isnt the problem. They cut back on wages, headcount and capacity yet their costs, from the operating statement that they showed the NMB and the unions, went up. Their non-fuel costs went up nearly $2billion, rents, "Other Costs" and "special charges"(they put it on the statement not me and I could care less how you look at it in accounting terms). Thats more than enough to provide all the workers at AA full restore, and more.

See that bolded portion? That's the rub: Prices have declined about 10.5% per ASM, in addition to the 10% capacity reduction. Don't know why you've ignored the numbers AA issued two weeks ago. Perhaps because they're reflective of reality instead of the fantasy that results in 2009 will mirror 2008.

So you are saying that I should base our contract on the projected results of one quarter? One of the worst quarters for the entire economy in the last 30 years? Come on FWAAA, you are just trying to set yourself up for a bonanza at our expense.

I've been gambling on airline stocks (and analyzing their numbers) far longer than the quarter century you've been a worker bee for the airlines. Revenue for this year's first quarter is going to come in about 20% less than last year's slow unprofitable first quarter. And unless the economy makes a quick turnaround, revenue for subsequent quarters will come in about 20% lower than yoy.

Like I said, you are trying to hedge your bets at our expense.

Well actually if you count my first airport job its been 30 years.

So the company is predicting a 20% decline in revenue on how much less capacity? 8% yoy? So the effect on yield would be around the area of a 12% decline in revenue. In the meantime fuel, which was around 40% of their costs declined in the double digits, labor also declined.

If you read the 8-K, you'd know that the numbers I've posted take the out-of-money hedges into account. AMR paid $2.00/gal in January, $1.96 in February, and about $1.80 in March, for a first quarter price of about $1.92/gal, reflecting the high priced hedges. AMR has projected a full year fuel cost of about $1.81/gal, leading to a fuel bill of about $5.0 billion for the year.

So fuel costs, which make up around 40% of their total costs may decline from $9 billion to $5billion. Or around 45% for the year.

Actually, first quarter load factors are down significantly yoy, as are yields (leading to the 10.5% decline in RASM). The rest of the industry is not expected to make money this year. On top of that, as you should know after a quarter century in the industry, full flights don't equal profitable flights.

I also know that despite the fact that this industry has reported losses for the majority of the last 25 years it has continued to expand for most of those 25 years. In other words profits really dont matter.

If we wait for the industry to make profits before we ask for a raise we would have been be making minimum wage for the last 75 years, in fact our executives built their bonuses not around profits but on beeing "less unprofitable".

So why should we allow whether or not the company is going to make money determine what we charge for our labor? If this industry is so critical that we arent allowed to strike then profitability doesnt matter.

Absolute nonsense. AA's concessions totaled $1.62 billion for the represented groups and $1.8 billion total, including management, agents and support staff. 2004's spending on wages and salaries (from the 10-K) reflects reduced spending of $1.8 billion. (2003's spending was only about $900 million less because the concessions were imposed in May.)

Wrong again. The fact is that management salaries are included in all that and management salaries(and PUPS) distort the real savings from "labor". AA reclassified all their supervisors and made them managers-upping their pay without saying they gave them raises.

Claiming that TWU members suffered $1.3 billion of the total $1.8 billion is ludicrous. When you embelish the truth like that, Bob, people stop taking you seriously. So pilots and FAs suffered only $300 million in concessions? Seriously? Your pants are on fire.

What I am saying, and sticking to is that we gave around $1,3 billion (in concessions and job losses) to the company, whether or not they realized those savings on their bottom line was up to them. If they used some of those savings for the PUPs, hire more management and to raise all thier supervisors to managers or even to pay OT to rectify some of the screw ups that overzelous cost cutting may have caused doesnt diminish the value of what we gave up. If I had to work 50 hours/week to make what I used to make in 40 then I took a paycut even if AA still claims they laid out $60k/yr for my labor.

Wage and benefit cuts comprised about half of the concessions, with job reductions accounting for the rest.

Where are you getting your figures from? Pilots had the jobs losses figured into their savings. (Thats why they got back 9% the first year)I dont know about the FAs. My guess is that both groups gave up more than management was able to realize. We lost 5000 jobs in M&R (10,000 in the TWU) that was not in the agreement nor was the cost savings of 5000 jobs in maintenance figured into the concessions. YOU ARE WRONG!!!!

 

[Bob Owens]

More bad news to rebutt Bob's flawed logic:

CO announced March RASM was down between 18.5% and 19.5% year over year.

Keep in mind capacity cuts have a positive benefit here if load factors stayed the same (which everyone says is the case).

I can't imagine that AA will fare much better (all pun intended).

Continentals contract became amendable 12/31/08

 

[eolesen]

Continentals contract became amendable 12/31/08

Bob, here's your new avitar:

 

[FrugalFlyerv2.0]

More bad news to rebutt Bob's flawed logic:

CO announced March RASM was down between 18.5% and 19.5% year over year.

Keep in mind capacity cuts have a positive benefit here if load factors stayed the same (which everyone says is the case).

I can't imagine that AA will fare much better (all pun intended).

BA also not doing so well ... ... ...

BA said: "Market conditions remain challenging, with both volume and yield under pressure."

BA planes travelled at an average capacity of 72.7% in March, against 79.1% in March 2008.

Premium traffic - those travelling in first and business class seats - dipped 13% during the month, while economy passenger numbers were down 6%.

 

[Bob Owens]

Bob, here's your new avitar:

View attachment 8323

I guess this is yours

 

[FrequentFlierCA]

They're all screwed, AA, BA, CO- all of them have seen precipitous drops in revenue YTD.

I won't rehash all the back and forth between FWAAA and Bob Owens except to say that Bob's response to my last post about revenue is very misleading. Revenue in and of itself is nearly irrelevant (EBITDA). The bottom line profit/loss and cash flow are what really matter with respect to the question of if AA can afford the raises the unions are demanding.

 

[Hopeful]

They're all screwed, AA, BA, CO- all of them have seen precipitous drops in revenue YTD.

I won't rehash all the back and forth between FWAAA and Bob Owens except to say that Bob's response to my last post about revenue is very misleading. Revenue in and of itself is nearly irrelevant (EBITDA). The bottom line profit/loss and cash flow are what really matter with respect to the question of if AA can afford the raises the unions are demanding.

So since it was stated that the executive PUPS does not drain cash....then the company should give each employee stock totaling in the thousands of shares exactly in the same format the executives get...

 

[FrugalFlyerv2.0]

So since it was stated that the executive PUPS does not drain cash....then the company should give each employee stock totaling in the thousands of shares exactly in the same format the executives get...

Would employees, or should I say the unions (since employees don't really have a direct say) ever agree to compensation in stock vs. cash?

 

[Hopeful]

Would employees, or should I say the unions (since employees don't really have a direct say) ever agree to compensation in stock vs. cash?

Let me answer by first saying this......I have never given a rat's arse what an executive made until I was force fed this concessionary package (and please don't tell me we voted for it...because Jim Little stated that as per his TWU Constitutional Authority could have voted yes for us by overriding the vote result.) Executives have more than been repaid for their fictitious pay cut the first year.

Having said that, I do not care for company stock in lieu of customary salary. Now, having said that...I will gladly NOW take THOUSANDS, not HUNDREDS of shares of stock using the SAME FORMULA the executives use.....ON TOP OF MY SALARY...JUST LIKE EXECUTIVES.....

For example and this is not factual, just hypothetical...
If an executive is making, say, $350,000 per year...and receives, say 10000 shares, then I should receive about 1/5th of that or 2000 shares because he makes 5 times what I do...

Does that seem unfair? He still making more than me and getting more shares because he wears a suit and tie and has a degree....But mechanics are the ones who have to worry about getting fined and/or license suspension/revocation for not following procedures VERBATIM......

So when the company throws around the term variable compensation, their formula actually means a pittance in stock and nothing substantial.



How's that for an answer?

 

[FrugalFlyerv2.0]

For example and this is not factual, just hypothetical...
If an executive is making, say, $350,000 per year...and receives, say 10000 shares, then I should receive about 1/5th of that or 2000 shares because he makes 5 times what I do...

How's that for an answer?

Thanks for the honest answer. I'm just curious to see what the opinions are (stock & cash compensation - which you brought up). Any thoughts whether your unions would agree to this?

 

[Hopeful]

Thanks for the honest answer. I'm just curious to see what the opinions are (stock & cash compensation - which you brought up). Any thoughts whether your unions would agree to this?

I'm sure they would be open to it. But realistically I doubt the company would go for it even using a simple formula that I gave as an example.
On one hand the union critics tell us we should opt for variable compensation when we bring up executive PUPS, then If we were to ask for stocks based on my example, we get the "well we can't do that...ya da dadya yada....

If an executive can get a PUP on top of his/her salary, then there is no reason every employee can't get the same option.
I guess the company fears to much stock dilution that will ultimately hurt the executives..

But the problem with this whole discussion is that the unions are being expected to choose variable compensation IN LIEU of customary compensation where the executives receive PUPS ON TOP of their base salary.

The typical class warfare argument.

 

[eolesen]

The second to last assumption you make is fatally flawed, Hopeful. Variable compensation is almost always in addition to a base salary. Sure, you'll find people who work 100% on variable comp, but they're quite rare.

I have variable compensation. My base salary is a guaranteed portion, and what I've budget my lifestyle to. Bonus for performance and commission on sales is entirely variable, and based off how well I can convert leads into sales, or how much of a markup I can work into a contract. Some of that is in my power, some isn't.

Some people working on commissions can earn several times their base salary (e.g. real estate) or zero times their base salary (e.g. real estate)... Start talking about partnerships, and it's possible that variable comp can be negative, i.e. in a bad year, partners sometimes wind up paying salaries and expenses for non-partners out of their own pocket in the form of officer loans...

Stock options are a reasonable request. At the current prices, it would be a relatively cheap investment for AMR to be issuing employee stock options.

 

[Hopeful]

The second to last assumption you make is fatally flawed, Hopeful. Variable compensation is almost always in addition to a base salary. Sure, you'll find people who work 100% on variable comp, but they're quite rare.

I am referring to AA executives....do they or do they not receive PUPS on top of salary?

When it is suggested that the unions take variable compensation, it is being insinuated that we choose that instead of traditional salary increases.

Show me one year where the executives at AA did NOT receive PUPS or some other form of bonus pay.....

If AA's argument is that their compensation is PERFORMANCE based...then they should be receiving SQUAT because the company is doing so poorly they have to furlough employees.....


As in the AIG case, AA executives are gettint their bonus money REGARDLESS of performance...


You do remember Carty's SERPGATE, don't you?
I'll take variable compensation on top of salary increases...what's good for the goose......you know the rest....


These masters of the universe guarantee themselves bonus pay regardless of economic conditions.