AMR loses $389 million in 2010, excluding special items

[WorldTraveler]

To me this is one of those too good to be true statements. Bob, or anybode else, do you have the numbers (hourly wages, benefits, vacation, pensions) to post for comparison?

I can tell you that AA, DL, and UA employees all make about the same $90K/yr in annual salary and benefits, including retirement funding.
CO employees are NOT as well compensated as the big 3 (even though CO is now part of the big 3 now) because CO employees are more junior and have less pension benefits accrued since CO, from a pension perspective, is a much younger airilne than AA, DL, and UA.

Bob has repeatedly posted that CO employees make more than AA employees and that may be true on a scale basis - but I have repeatedly said that CO and AA's seniority and average age of employee is altogether different and those numbers absolutely affect employee costs.

 

[WorldTraveler]

No, Bob. Your post above assumes that the only workgroup to which I was referring is maintenance, which is not the case. I realize that it's the center of your universe, but the numbers don't lie, and neither do I, despite your repeated assertions (that you can't back up) that I'm lying. $3.2 billion at UA compared to $1.62 billion for the represented employees at AA.

As a whole, UA employees gave up far more on average than AA employees. Productivity? AA's pilots and FAs fly less than almost any other airline and yet their pay is at the top of the legacy scale.

Mechanics? Yes, mechanics make more at than you at some of the legacies, but overall, employees at UA, NW, DL and US took much larger paycuts than the average AA employee. That's why DL+NW and UA+CO have total compensation expenses about the same as AA despite both having more employees than AA.

Not entirely true.
AA's employee expenses are higher because AA employees are about 20% less productive than other airline employees... and the fact that AA does inhouse overhauls has nothing to do with it. AA has about 10,000 TOO MANY EMPLOYEES based on the size of its network using productivity rates that DL and UA/CO have. It doesn't take 10,000 employees to do overhauls - and those who argue that AA's maintenance is all done in house also incorrectly argue that other carriers do no in-house overhauls.

Also, DL employees are going to receive on average 6.5% of their salary in profit sharing... which based on the average $40k per year non-pilot employee comes out to close to $3000 in profit sharing. In addition, most PMDL employees received a near 10% pay raise - and the expectation is that PMNW employees will also receive it after the IAM/AFA challenges to the votes are dropped.

We haven't heard from UA/CO yet for their financial report but the notion that AA employees are higher paid is no longer accurate. AA employees avoided some of the cuts that the formerly BK airlines had - but many of those cuts were replaced by one-time cash payouts and stock grants given when those airlines came out of bankruptcy. Now that DL - and undoubtedly CO/UA will follow as part of their merger process - start passing out pay raises - and profit sharing is paid at much higher rates at other airlines, then the pay gap will tilt decidedly AGAINST AA employees when salary comparisons are made in the near future.

As for AMR's attempt to sell Eagle, they will likely have the same result as DL did with Comair. The investment community can see that there is a surplus of regional jets in the industry and they are not going to buy out Eagle except at a significant loss to AMR.

AMR will likely do what DL did which is to shrink the size of its regional operations by taking aircraft out of service - esp. 50 seaters. In DL's case, they simply took a big whack at Comair and obtained a big chunk of the cuts from one owned carrier. Since AA has far fewer players to work with, they don't have the choice of cutting capacity at one or two carriers in order to get what they need...

 

[700UW]

I can tell you that AA, DL, and UA employees all make about the same $90K/yr in annual salary and benefits, including retirement funding.
CO employees are NOT as well compensated as the big 3 (even though CO is now part of the big 3 now) because CO employees are more junior and have less pension benefits accrued since CO, from a pension perspective, is a much younger airilne than AA, DL, and UA.

Bob has repeatedly posted that CO employees make more than AA employees and that may be true on a scale basis - but I have repeatedly said that CO and AA's seniority and average age of employee is altogether different and those numbers absolutely affect employee costs.

CO's FAs are represented by the IAM and are one of the highest paid in the industry with a pension.

 

[eolesen]

While having too many <51 seaters is an issue, the main reason nobody is going to seriously consider buying or even investing in Eagle is the current APA scope clause.

Right now, Eagle is effectively hamstrung in their ability to fly fee-per-departure for other airlines. Pretty certain they can do it, just not from or to AA hubs. They're also prohibited from operating 70+ seaters for other airlines.

If APA wanted to jettison Eagle from AMR, they could do so tomorrow. All they'd need to do is sign off on a side letter allowing Eagle to operate larger aircraft for other airlines regardless of the market. Since they appear to see Eagle as a thorn in their side, I really don't see why they're not willing to help AMR cut the apron strings.

 

[TWU informer]

Actually, AMR has had 11 profitable quarters since the concessions were imposed. Perhaps you were thinking of profitable years? AMR has had but two profitable full years since the concessions.

At your convenience please provide documentation or some proof that AMR has reported a profit in 11 quarters since concessions were "IMPOSED" as you put it. Thanks

 

[FWAAA]

At your convenience please provide documentation or some proof that AMR has reported a profit in 11 quarters since concessions were "IMPOSED" as you put it. Thanks

No problem. AMR reported net profits in the following quarters:

3Q2003
2Q2004
2Q2005
2Q2006
3Q2006
4Q2006
1Q2007
2Q2007
3Q2007
3Q2008
3Q2010

AMR reported full year net profits in 2006 and 2007 and full year net losses in 2002-05 and 2008-10.

The easiest place to find these numbers is in the back of the annual 10-Ks where quarterly results are summarized (that spares you from having to look in each quarter's 10-Q).

 

[TWU informer]

No problem. AMR reported net profits in the following quarters:

3Q2003
2Q2004
2Q2005
2Q2006
3Q2006
4Q2006
1Q2007
2Q2007
3Q2007
3Q2008
3Q2010

AMR reported full year net profits in 2006 and 2007 and full year net losses in 2002-05 and 2008-10. The easiest place to find these numbers is in the back of the annual 10-Ks where quarterly results are summarized (that spares you from having to look in each quarter's 10-Q).

OK Thanks


SO for TOTALITY purposes, taking each year. What are the total reported losses since March 2003 minus any reported proftis? For a total $'s lost reported since the "Lawyers were on the Steps" Loitering for about 4 months?

 

[FWAAA]

Typical lawyer, keep repeating the same lies and hope they will stick.

The fact is that when you take you average worker, include benifits, vacation, holidays, sick time etc, most of those who went BK are as well as or better off than AA. Delta makes quite a bit more than we do. So does Continental.

At AA the TWU had hired ECLAT to do the numbers, the same company that the company hired to sell the union on concessions. ECLAT way undervalued our concessions.

UA eliminated the workers on the front end and the full value of those eliminated workers was put iinto their valuation, AA eliminated them over time and did not include the value of those workers, UA started recalling workers before AA did. In all AA eliminated around 30,000 workers since the concessions, only a fraction of which was included in the concessions so you would need to add at least a billionto AAs figure.

UAL mechanics did not take double the paycuts we did. when you factor everything in they earn about as much as we do.

Not just talking about mechanics, Bob. On average, UA employees make less than AA employees. Bob Herbst of www.airlinefinancials.com confirms this on his website.

AA's concessions of $1.8 billion ($1.62 billion of which were imposed on represented employees) consisted of both wage cuts and job cuts. From the 2003 10-K:

In February 2003, American asked its labor leaders and other employees for approximately $1.8 billion in permanent, annual savings through a combination of changes in wages, benefits and work rules. The requested $1.8 billion in savings is divided by work group as follows: $660 million—pilots, $620 million—Transportation Workers Union (TWU) represented employees, $340 million—flight attendants, $100 million—management and support staff, and $80 million—agents and representatives. On March 31, 2003, the Company reached agreements with the leaders of the three major unions representing American employees (the Labor Agreements) and announced changes in pay plans and benefits for non-unionized employees (including officers and other management) which will meet the targeted contributions. Of the approximately $1.8 billion in savings, approximately $1.0 billion are to be accomplished through wage and benefit reductions while the remaining approximately $.8 billion would be accomplished through changes in work rules which would result in additional job reductions. Wage reductions became effective on April 1, 2003 for officers and will become effective on May 1, 2003 for all other employees. Reductions related to benefits and work rule changes will be phased in over time.

So at AA, paycuts were $1.0 billion and job reductions were $800 million. I'm certain that the UA concessions of $3.2 billion (by 2005) consisted of a combination of paycuts and job reductions, just like at AA. Bob, the numbers don't lie. In 2004, once the AA concessions had been completely implemented, AA's wages were almost exactly $1.8 billion less than they were in 2002 before the concessions and slowly increased each year due to the 1.5% increases to all employees for the five years of the agreements.

UA, a smaller airline than AA, paid about $3 billion less in wages in 2006 than it did in 2002, thanks to more than $3 billion in concessions. Just like at AA, UA furloughed thousands of mechanics, pilots, FAs, fleet and agents. But UA's concessions saved it substantially more money each year beginning in 2003 and even more money beginning in 2005 when UA's second round kicked in.

I realize that these facts don't support your assertions that AA's employees suffered more paycuts than any other airline's employees, but those assertions are false.

You can continue to post that AA's concessions were the largest, but it's not accurate. Not by a longshot.

 

[Bob Owens]

Not just talking about mechanics, Bob. On average, UA employees make less than AA employees. Bob Herbst of www.airlinefinancials.com confirms this on his website.

AA's concessions of $1.8 billion ($1.62 billion of which were imposed on represented employees) consisted of both wage cuts and job cuts. From the 2003 10-K:



So at AA, paycuts were $1.0 billion and job reductions were $800 million. I'm certain that the UA concessions of $3.2 billion (by 2005) consisted of a combination of paycuts and job reductions, just like at AA. Bob, the numbers don't lie. In 2004, once the AA concessions had been completely implemented, AA's wages were almost exactly $1.8 billion less than they were in 2002 before the concessions and slowly increased each year due to the 1.5% increases to all employees for the five years of the agreements.

UA, a smaller airline than AA, paid about $3 billion less in wages in 2006 than it did in 2002, thanks to more than $3 billion in concessions. Just like at AA, UA furloughed thousands of mechanics, pilots, FAs, fleet and agents. But UA's concessions saved it substantially more money each year beginning in 2003 and even more money beginning in 2005 when UA's second round kicked in.

I realize that these facts don't support your assertions that AA's employees suffered more paycuts than any other airline's employees, but those assertions are false.

You can continue to post that AA's concessions were the largest, but it's not accurate. Not by a longshot.

Maybe "numbers dont lie" but that doesnt mean that liars dont use numbers, just ask Bernie Madoffs former clients. I'm saying the numbers are bogus. They were bogus then and they are bogus now, and yes I'm only looking at mechanics but if one of the numbers is wrong then the sum is also wrong.

 

[will fix for food]

I keep hearing that Eagle is high cost. Does anyone have any access to documents to compare scales in the various work groups with their peers?

I know the mechanic top-out isn't the highest or lowest in the industry and I know the ramp is the same. Our benefits are average at best. If the problem is longevity and the costs related to that that will probably be fixed shortly with all the pilots going to American and probably a good chunk of mechanics if what Bob says about hiring is true.

BTW, rumors are starting to float around the floor the divestiture is on hold again. Who knows how true that is.

 

[Veritas]

So stating the truth is condescending, patronizing and arrogant? Everything I posted is true-that AA employees have fared better than counterparts at carriers that have filed BK. I also stated that give the dynamics of current job market (particularly for airline employees), union employees at AA need the company more than the company needs them.

It is the opinion and the manner in which it is stated that is "condescending, patronizing and arrogant."

Face the facts-in 2003 the unions at AA were truly in the fetal position and were willing to offer the company whatever was necessary for the company to continue operating and eventually restructure... The attitude that AA owes you some debt for making sacrifices that helped keep YOUR job and YOUR airline viable has got to end.

While it may seem harsh, the fact of the matter is you all need the company more than the company needs you...

Didn't the airline industry receive substantial government assistance immediately following the September 11th attacks?

The general public has benefited substantially from the Troubled Asset Relief Program...

The post 9/11 government financial assistance to the airline industry was reimbursement for losses incurred as a result of the government shutdown of the nation's airways (Congressional Record). That is quite different from the bailout of the financial industry whose troubles were self made and originated with their own greed.

 

[damajagua]

Not just talking about mechanics, Bob. On average, UA employees make less than AA employees. Bob Herbst of www.airlinefinancials.com confirms this on his website.

AA's concessions of $1.8 billion ($1.62 billion of which were imposed on represented employees) consisted of both wage cuts and job cuts. From the 2003 10-K:



So at AA, paycuts were $1.0 billion and job reductions were $800 million. I'm certain that the UA concessions of $3.2 billion (by 2005) consisted of a combination of paycuts and job reductions, just like at AA. Bob, the numbers don't lie. In 2004, once the AA concessions had been completely implemented, AA's wages were almost exactly $1.8 billion less than they were in 2002 before the concessions and slowly increased each year due to the 1.5% increases to all employees for the five years of the agreements.

UA, a smaller airline than AA, paid about $3 billion less in wages in 2006 than it did in 2002, thanks to more than $3 billion in concessions. Just like at AA, UA furloughed thousands of mechanics, pilots, FAs, fleet and agents. But UA's concessions saved it substantially more money each year beginning in 2003 and even more money beginning in 2005 when UA's second round kicked in.

I realize that these facts don't support your assertions that AA's employees suffered more paycuts than any other airline's employees, but those assertions are false.

You can continue to post that AA's concessions were the largest, but it's not accurate. Not by a longshot.

I wish you where wrong FWAA. But you are def. right. The problem at AMR is that our executives have continue to reward each other with
huge "bonuses" for lack of better word........I know you do not like to use that word. Or maybe I should say "creative" compensation while
the front line employees have to continue to work on contracts that whrere suppose to be for five years now going on seven.
If the leaders at the top would have said no "creative" compensation to any of executives you would probably have a work force that
would be more sympathetic to management. Am not blind to know we are def. better compensated than UA and DAL. not to mention
that we still have a pension. But you can understand the frustations of the front line employees when the company says that they can not
afford to give us a raise but every April for the last seven years they find a way to reward about 800 employees no matter how bad
we are doing. I believe this is a very serious problem at AA. The resentments that this rewards causes is huge. I bet you that if all these years
our CEO and the select few would have been refusing all these "creative" rewards employees would feel much different.
AA employees have already showned that they are willing to help the company. On the other side of the coin it seems like the executives
have not.

 

[FWAAA]

OK Thanks

SO for TOTALITY purposes, taking each year. What are the total reported losses since March 2003 minus any reported proftis? For a total $'s lost reported since the "Lawyers were on the Steps" Loitering for about 4 months?

Net Income (Loss) by year (millions of dollars):

1999      $985
2000        813
2001    (1,762)
2002    (3,511)
2003    (1,228)
2004    (   761)
2005    (   861)
2006        231
2007        504
2008    (2,118)
2009    (1,468)
2010    (   471)

Total net loss 2003-2010 (eight full years) = ($6.172 billion).

Years 1999-2002 included for comparison purposes (and in case anyone wants net losses including 2001 and 2002 which alone total almost $5.3 billion, almost as much as 2003-2010). AMR's aggregate losses from 2003 to present appear to be less than at UA, DL and NW, but I have not checked the numbers.

The losses above include all special items, which are usually non-cash deductions and writedowns/writeoffs of worthless assets and extraordinary expenses which are non-recurring (station closures, etc). They're non-cash because they don't represent cash actually spent in the year of the deduction or big writedown/writeoff - they represent cash spent in prior years to buy the planes or routes or slots or other asset that has now become worthless and must be written down/written off. If AA buys a plane for $35 million, it typically deducts 4% or 5% of that value each subsequent year unless the asset suddenly drops in value - then the accounting rules require that AA writeoff a much larger portion all at once. That happened with the AB6 fleet and the 37 seat RJs.

Aggregate net losses of over $6 billion are not enviable (especially in light of the huge wage givebacks of the AA unionized workers), but given the residual effects of the September 11 terrorist attacks, the SARS epidemic, the unprecedented fuel price spike and the Worst Recession Since the Great Depression (according to Obummer), I'd say that until recently, AA's financial performance wasn't all that bad compared to the other legacy airlines like UA, DL, NW and US which between them filed for Ch 11 protection five times during the last nine years.

AA's turnaround this past year is very disappointing and there's lots of blame to go around. Management was too slow to buy new 738s in the middle of the decade when profits returned, meaning that AA spent hundreds of millions (perhaps even a billion or two) more than it would had management ordered new 738s in 2005 or 2006 instead of waiting a couple years too long.

AA's unit revenue improvement appears to lag that of DL, UA and CO (nobody really cares about US). Reasons for that could include news all last year about the possibility of TWU and APFA strikes which might have caused some bookaway to other airlines. I realize that strikes were not imminent, but many people don't understand the ins and outs of the RLA's procedures and the media did not adequately explain that strikes were very unlikely. That might have cost AA some revenue.

AA's pilots and FAs are less productive than at most other airlines yet are near top pay of any legacy airline. That's worth a few hundred million dollars annually according to management, so without the labor cost disadvantage, AA would have reported a small profit in 2010 instead of yet another loss.

There are probably many other reasons that AA's numbers are lagging DL and UA. Give WT a few hours and I'm certain we'll see many more of them posted here. B)

 

[Frank Szabo]

Net Income (Loss) by year (millions of dollars):

1999      $985
2000        813
2001    (1,762)
2002    (3,511)
2003    (1,228)
2004    (   761)
2005    (   861)
2006        231
2007        504
2008    (2,118)
2009    (1,468)
2010    (   471)

Total net loss 2003-2010 (eight full years) = ($6.172 billion).

Years 1999-2002 included for comparison purposes (and in case anyone wants net losses including 2001 and 2002 which alone total almost $5.3 billion, almost as much as 2003-2010). AMR's aggregate losses from 2003 to present appear to be less than at UA, DL and NW, but I have not checked the numbers.

The losses above include all special items, which are usually non-cash deductions and writedowns/writeoffs of worthless assets and extraordinary expenses which are non-recurring (station closures, etc). They're non-cash because they don't represent cash actually spent in the year of the deduction or big writedown/writeoff - they represent cash spent in prior years to buy the planes or routes or slots or other asset that has now become worthless and must be written down/written off. If AA buys a plane for $35 million, it typically deducts 4% or 5% of that value each subsequent year unless the asset suddenly drops in value - then the accounting rules require that AA writeoff a much larger portion all at once. That happened with the AB6 fleet and the 37 seat RJs.

Aggregate net losses of over $6 billion are not enviable (especially in light of the huge wage givebacks of the AA unionized workers), but given the residual effects of the September 11 terrorist attacks, the SARS epidemic, the unprecedented fuel price spike and the Worst Recession Since the Great Depression (according to Obummer), I'd say that until recently, AA's financial performance wasn't all that bad compared to the other legacy airlines like UA, DL, NW and US which between them filed for Ch 11 protection five times during the last nine years.

AA's turnaround this past year is very disappointing and there's lots of blame to go around. Management was too slow to buy new 738s in the middle of the decade when profits returned, meaning that AA spent hundreds of millions (perhaps even a billion or two) more than it would had management ordered new 738s in 2005 or 2006 instead of waiting a couple years too long.

AA's unit revenue improvement appears to lag that of DL, UA and CO (nobody really cares about US). Reasons for that could include news all last year about the possibility of TWU and APFA strikes which might have caused some bookaway to other airlines. I realize that strikes were not imminent, but many people don't understand the ins and outs of the RLA's procedures and the media did not adequately explain that strikes were very unlikely. That might have cost AA some revenue.

AA's pilots and FAs are less productive than at most other airlines yet are near top pay of any legacy airline. That's worth a few hundred million dollars annually according to management, so without the labor cost disadvantage, AA would have reported a small profit in 2010 instead of yet another loss.

There are probably many other reasons that AA's numbers are lagging DL and UA. Give WT a few hours and I'm certain we'll see many more of them posted here. B)

You made mention of the "P" word again - Productivity.

Now, I certainly haven't a problem with the word but, with respect to the company in question here, what exactly does it mean and which workgroup seems to be the least "productive" and why? While you're at it, define the other non-specific variable - "workrules" - agian, many references yet very little definition. In dealing with higher math, there is a limit as to how many variables may be unsolved for until the equasion itself becomes unsolvable. With so little definition, I'm being to write these terms off to "Mother Nature is a ####".

What exactly are these onerous things that are seldom defined yet have such a great bearing upon the supposed "well-being" of the corporation?

 

[Hopeful]

AA's pilots and FAs are less productive than at most other airlines yet are near top pay of any legacy airline. That's worth a few hundred million dollars annually according to management, so without the labor cost disadvantage, AA would have reported a small profit in 2010 instead of yet another loss.

There are probably many other reasons that AA's numbers are lagging DL and UA. Give WT a few hours and I'm certain we'll see many more of them posted here.

Let's talk about executive productivity...or does that not matter?

How much can the AA elite give back to help the bottom line?