Who's really on top?

[Birdman]

Cost and pay rates are mutually exclusive, so the only thing distorted is your perception of the quote.

There's no disputing that AA has more employees, therefore has more cost.

Next...

And you believe they're just stating the obvious, more employees=more labor cost, for no reason at all. Doesn't mutually exclusive mean they cannot both occur at the same time? Could your analysis be an oxymoron? I'm just here to learn.

 

[eolesen]

So in other words when AA says it has the highest labor costs it means absolutely nothing.

Uh, yeah.... Right. It means nothing. Really.

I just wish some of our International Reps and their so called economist could see that.

Unlike you, they don't have their heads buried in the sand...

 

[aamechntx]

Hows this for reality? We really only want what the other airlines are already paying or have offered their employees. I want the same benefits package that they have. I want my vacation, sick time, holiday and pay restored. Were not asking for a industry leading contract just looking for parity. If the other airlines can give their employees a better total benefits package why cant AA?

 

[Bob Owens]

There are few perks left anymore aside from reserved space travel and perhaps a financial/tax advisor.

Yes, the tax advisors who tell them to deny thet the bonuses are bonuses. The reason why they keep insisting that these arent bonuses and why they are paid with stock is so they get to pay the lower Capital Gains tax instead of the higher payroll tax.

Cut their salaries by 50%, distribute the difference evenly amongst the other 60,000 or so employees, and that's about $1000 per year. Eliminate all those jobs, and it's $2000 per employee.

They can afford a 50% paycut more than we can afford the 40% paycut we took. I say cut them 50% and that extra $1000 will go towards our increased costs for gas to get work and energy to run our homes. Shared pain, thats what they promised, its time to see it.

 

[Hopeful]

That's nice. How noble of you.

But when what you think is "right" means getting large increases in compensation from a company that is losing money, at some point you will have an ugly encounter with reality.



Please. Every unionized employee at UA, LCC, DL, etc., wails nonstop about how their company is the worst and how all other airlines treat their employees so much better.

How convenient of you to omit Arpey and Co... still getting "THEIRS" from a company that is still losing money.


Where were you and your opinion when what the company thought was "right" was GIVING BACK LARGE CONCESSIONS SO AA COULD ALLEGEDLY SURVIVE?

Company always right, workers wrong? right Bear?

 

[BoeingBoy]

I'll admit that I haven't researched it, because I'm too lazy, and AA doesn't disclose total management comp.

Actually management compensation is broken out in one place that I know of - the info submitted to the BTS. So the 3rd party sites like MIT's Airline Data Project and Airline Financials, which use the BTS data, have a "purer" labor cost comparison of the airlines.

Jim

 

[FWAAA]

Actually management compensation is broken out in one place that I know of - the info submitted to the BTS. So the 3rd party sites like MIT's Airline Data Project and Airline Financials, which use the BTS data, have a "purer" labor cost comparison of the airlines.

You're right - I misspoke. I should have said "AA doesn't disclose total management comp in its quarterly financials." Given that I'm lazy, looking them up in the BTS data is usually too daunting for me. That and I've never been convinced that the management comp found in the BTS data (and thus, in the other compilations like MIT ADP and Bob Herbst's Airline Financials) is the real total - it always looks to me like it's too small a number to be all of it.

I can get the top executive comp in the Proxy Statements, but those aren't filed until closer to the annual meeting and that data is always previous year, not the current year (which is almost half over by time it's filed).

That said, I'm still convinced that management pay is basically a constant.

 

[eolesen]

Hows this for reality? We really only want what the other airlines are already paying or have offered their employees. I want the same benefits package that they have. I want my vacation, sick time, holiday and pay restored. Were not asking for a industry leading contract just looking for parity. If the other airlines can give their employees a better total benefits package why cant AA?

Great. Then accept their contracts in entirety, including scope and workrules. You willing to do that?

 

[FWAAA]

So in other words when AA says it has the highest labor costs it means absolutely nothing. I just wish some of our International Reps and their so called economist could see that.

I don't think that's a fair paraphrase of what I said. Here's my condensed version:

AA's labor costs are the highest in the industry. AA's wages are roughly in the middle; some workgroups are near the top (pilots and FAs) while others (ground employees) are in the lower middle.

AA has a revenue premium, but its labor cost premium is even larger. AA doesn't have to have the lowest labor costs, but it needs to reduce the labor cost premium so that the higher labor costs don't exceed revenue by quite as much. That can be accomplished even if the employees get raises. How? More efficent productivity, primarily from the inflight workgroups.

As to the mechanics, the line employees hoping for $45/hr like UPS and WN are tied to the boat anchors that are the overhaul group. As long as the two groups are tied together I'm certain that AA will never offer $45/hr to its AMTs (mainly because THAT would make AA's overhaul not cost-effective). AA's overhaul may be cost-effective at today's hourly rates (I know, Arpey told you that the jury is out), but not at $45. At $45, I'd bet that the jury promptly brings back a verdict of: Too expensive.

You guys in the high-cost areas deserve $45. Maybe even more. Nobody with half a brain could deny that. And the guys in Tulsa and Fort Worth deserve a raise. But give them $45? Do you pay your hired help twice as much as they'd be willing to take? I don't. Why should AA?

I'm willing to be fair, make us number one and we will do everything we can to make AA number one, however they are doing everything they can to put us at the bottom so we are forced to do the same.

The above is a recurring theme in your posts and Hopeful's posts. There's an underlying assumption that AA's place in the rankings actually matters, and I don't think that's a valid assumption. AA is going to take in about $20-$22 billion this year regardless of where AA ends up in the on-time rankings or the quality rankings or any other ranking of the airlines.

If the economy booms and companies are much more free-spending with their travel budgets, then AA's revenue will soar. If fuel costs don't soar, then AA could turn profits. Simple as that.

The people buying F and J tickets (AA's bread and butter) to LAX and LHR and Japan and China and S America don't give a tinker's damn about the percentage of flights that arrive more than 14 minutes late. AA's revenue plunged about 20% in 2009 from 2008 and not one penny of that decline had anything to do with flights late or canceled because you guys take your time changing engines. So AA could raise your base pay to $100k (or whatever it takes to get you guys motivated and happy as clams) and in my view, it wouldn't increase AA's top-line revenue one cent. Problem is, passengers don't care. If AA doesn't buy tremendously expensive F and J seats and replace old airplanes and renovate the fancy lounges, they might choose a different airline that does all those things.

AA is the only US-based airline still doing in-house overhaul. Think that matters to passengers? Doesn't seem to keep AA from losing more money than every other airline. You sometimes post that maybe AA should ditch F and J and just fly coach because that seems to work for WN. Well, perhaps AA should close TULE and outsource its overhaul, just like WN and UPS and CO and UA and DL and US. Ahh, there's that boat anchor again. What do all those airlines paying higher AMT wages have in common? None of them do inhouse heavy airframe overhaul.

Yes, the tax advisors who tell them to deny thet the bonuses are bonuses. The reason why they keep insisting that these arent bonuses and why they are paid with stock is so they get to pay the lower Capital Gains tax instead of the higher payroll tax.

Bob, for the love of God, don't repeat things like the above. It's just not true. You don't have to belive me - just ask any tax advisor. Any accountant or lawyer can confirm it.

The PUP/PSP stock payouts are taxed at ordinary income rates, not capital gains rates. If they were taxed at capital gains rates, then the base salary of every executive would be $20,000 and the remainder would be in stock payouts. If it worked, then even you would demand to be paid in stock, since it would lower your tax bill, right? Why would AA's 777 pilots agree to be paid $200/hr in cash? Wouldn't they rather get stock if it lowered their tax bill? They don't (and you don't) because that's not how compensation for work is taxed.

Annual pay for work is taxed at ordinary income rates no matter what currency is used: Cash, stock, real estate, etc. If Apey's PSP payout is a million dollars and he gets shares worth a million dollars, he's taxed on a million dollars of ordinary income. If he holds the stock for the long-term, then appreciation above his new million dollar basis is taxed at capital gains rates. But that is the same result as would occur if he got a million dollars in cash and then turned around and bought stock and held it.

The reason the PSP payouts are in stock and not cash is because of the grievance that was filed after the first PUP payouts were announced. And I agree that paying the amounts in stock rather than cash is a meaningless distinction, since stock given to executives is stock that the company could have sold to the public in a stock offering, which would have bolstered the cash balance. If the PUP/PSP payouts are bad, they aren't made any less bad by paying them in stock instead of cash. Another example of the union leaders taking defeat and painting it as victory to their rank and file. Impotent to stop the PUP payouts, they latched onto a meaningless "fix" that didn't change anything.

As an aside, I have long claimed that the PUP/PSP payouts aren't a "bonus" in my book becuase I view a bonus as something discretionary that bosses give workers when it isn't part of their contract. As in "unexpected." When AMR was paying out $250-$350 million a year in profit sharing to the employees in the late 1990s, did you think of those checks as a bonus? I didn't (and no, I wasn't receiving them, I was applauding AA's huge profits and the good fortune of the employees, many of whom were getting an average of $3,000). The payouts were part of a pre-existing profit sharing plan that set forth the percentage of profits set aside for the employees. The amount was uncertain until the end of the year (when the size of the profit was finally known) but the obligation to pay it was known in advance. Same with the PUP/PSP plan. AFAIK, there was no discretion involved. Management couldn't say "No profit sharing for the employees this year despite the $1.3 billion profit."

 

[aamechntx]

Great. Then accept their contracts in entirety, including scope and workrules. You willing to do that?

How about we accept the contract that we bargained for in 2001? As I recall that was in good faith, right?

 

[eolesen]

How about we accept the contract that we bargained for in 2001? As I recall that was in good faith, right?

That's not what you asked for. You sAID "we really only want what the other airlines are already paying or have offered their employees. I want the same benefits package that they have."

Then you said "I want my vacation, sick time, holiday and pay restored."

You seem to think this is the Golden Corral. Sorry, but it's not, and there are no substitutions on the menu.

You want their pay and benefits, you get the scope and workrules that come along.

 

[BoeingBoy]

That and I've never been convinced that the management comp found in the BTS data (and thus, in the other compilations like MIT ADP and Bob Herbst's Airline Financials) is the real total - it always looks to me like it's too small a number to be all of it.

I certainly agree - too many people to just be even mid/upper management (over 7,000 for 2009). It must include everybody with "supervisor" and above in their job title. The total (over $484 million in 2009) is probably in the ballpark.

Jim

 

[Bob Owens]

Great. Then accept their contracts in entirety, including scope and workrules. You willing to do that?

Yes. Because I know that there's nothing in our contract that prohibits them from doing what they want anyway, and if there was they would simply threaten to go bankrupt and get it removed just like they did with system protection back in 2003.When the company said "pay and benifit cuts or headcount cuts" the union said cut the heads, the company came back and said NO, they could not run their operation if they cut that many heads(they ended up cutting nearly double that).

Prior to 2003 AA was one of the leading outsourcers, the reason why they have brought more work in house is because of the quality and cost of the stuff they sent out. So many other carriers started sending their stuff out so my guess is they started charging more, which is why other carriers are starting to bring more work back in house. As the industry consolidates I would expect to see this trend continue. What you seem to forget when you cite SWA and UPS is that AA already has the facilities and staff in place to do OH, those companies never had it, so they would have to build and aquire those assetts. I believe Hangar 10 at JFK was built in 1959, 50 years ago and its still a better Hangar than Jet Blues brand new one.

Time and time again I've asked you to cite any workrule that we have that puts AA at a competitive disadvantage, our contract is on the WEB so you cant claim you dont have it at your disposal. Well I'm still waiting.

http://twu562.org/

 

[eolesen]

Simple. ASM cap on RJ's.

AA's only able to put out about 25% of their network out for bid. Industry average is 40%.

Another one is the annual departures cap for outsourcing.

It might mean fewer union jobs, but the reality is that the RJ & airport staffing outsourcing gives flexibility to DL, UA, and CO, and allows them to serve a lot more tiny destinations than AA can. And they've got far more extensive domestic networks as a result.

 

[jimntx]

But, is that RJ cap in the mechanics' contract or the pilots? If there's nothing in the mechanics' contract limiting RJ usage, then it shouldn't be used in a cost argument against them. Though, I think the pilots have been misguided in fighting the rj usage to some extent. Does it really save pilot jobs? Or, since they have flowthrough between AA and AE, does the scope clause just prevent recall of more pilots?

I would like to see AMR able to purchase the 100-seat RJ. We have no a/c between 70 seats (CRJ700, I think, and not many of those) and 140 seats (S80). And, I don't care who gets to fly it, whether AA or AE. I used to like the Fokker 100 myself. Other than it was old, it wasn't a bad airplane.