Bob Owens visits airline analysts to argue labor's side of story

[Birdman]

thanks for the reminder... I have been there before but there is a lot of stale data. Just as I said, the sources of data to compare employee costs are DOT data (which is the last to come in and most dated), airline schedules, and contracts and wage scales.

I'm suspicious why the compAAny would continue to use "stale data" in lieu of updated data that was more supportive of their agenda.

As I also have noted before, the key difference between most AA groups and competitors is productivity. Even the company graphs as old as they are show that AA employees do not make much more than other network peers, or if they do, the salary difference is not nearly as significant as the differences in productivity.

I'm only concerned with M&R. Show me where our productivity does not meet or exceed that of our competitors. BTW, outsourcing percentages will not be accepted without supporting data.

Solving productivity problems doesn't mean that AA employees should take lots of paycuts; there does need to be a whole lot fewer AA employees for the size of the airline or there have to be significant enough concessions to allow the company to be able to profitably compete today with the expectation that productivity improvements will come later ie there must be some combination of pay cuts and productivity improvements over a period of time but the company cannot start growing or expanding until it can do so profitably which means pay rates are usually what has to come first; all of the carriers in bankruptcy took the approach of cutting pay for a short period of time to give the company a window to expand. I know full well that you all took cut in 2003 that the cmopany should have used to grow but they didn't take them - in some cases for key strategic reasons such as the fuel runup in 2005 - which is what sent DL and NW into BK and later each other's arms.
I have heard a lot of "we're not giving again" language and I am not sure what the solution is if you aren't willing to lay off some people to get productivity back in line and thus AA's costs down....

I fail to see any contract language at their disposal that would prevent manAAgement from wringing more productivity out of M&R. As Informer stated, the compAAny is in the process of hiring a plethora of new mechanics. You say that is the wrong approach, and I agree, but who's really in control?

 

[TWU informer]

That's easy: Democrat.

I'm from Chicago, and they taught us that in middle school.

Also considered valid employees in the Craft or Class by the National Mediation Board when a group of employees file for a representation election to oust the most docile union in the Airline Industry. It didn't matter how they would vote, they were just considered valid to inflate the numbers to prevent the vote to begin with.

 

[odie01]

Also considered valid employees in the Craft or Class by the National Mediation Board when a group of employees file for a representation election to oust the most docile union in the Airline Industry. It didn't matter how they would vote, they were just considered valid to inflate the numbers to prevent the vote to begin with.

Hopefully we are up to speed on who is eligible to vote when it comes down to the election, from what I am told we are up to date. Of course if aa hires 1000 more, we will have to tack on another 500. 50% is not the target, we will have some cushion.

 

[Kev3188]

I have heard a lot of "we're not giving again" language and I am not sure what the solution is if you aren't willing to lay off some people to get productivity back in line and thus AA's costs down....

A decent early out program would be a step in the right direction.

 

[Kev3188]

I'm only concerned with M&R. Show me where our productivity does not meet or exceed that of our competitors. BTW, outsourcing percentages will not be accepted without supporting data.

It's not usually broken down by work group, but you can see ASM's produced per employee (taken as a whole) on several sites. AA trails the pack.

I fail to see any contract language at their disposal that would prevent manAAgement from wringing more productivity out of M&R. As Informer stated, the compAAny is in the process of hiring a plethora of new mechanics. You say that is the wrong approach, and I agree, but who's really in control?

A few have noted this. We had the same situation at NW. Lots of possible productivity allowed by our CBA's that was never implemented. What specifically in the M&E one is not being used (or at least not enough)?

 

[Birdman]

A few have noted this. We had the same situation at NW. Lots of possible productivity allowed by our CBA's that was never implemented. What specifically in the M&E one is not being used (or at least not enough)?

The contractual labor loan and 3/7ths weekend coverage allowances was not what I was driving at, but they are seldom used. It was accountability, as there are no contractual limits to enforce it. There are those who do very little with impunity, knowing there will be nothing said. Sure, everyone's miffed about the contract but those that actually produce an honest days work are deflated by those who do not. The productivity and professionalism of the 90's are so foreign to today's workforce that they don't even believe it ever occurred.

 

[DallasConehead]

snip:

It is a lot harder to know w/ certainty which groups are driving the problem... but one thing is certain and that is that the excuse that AA does in-house overhauls is not even close to the whole reason. AA has almost 10K too many employees if it used the ratios of productivity that DL and UA have.

bottom line is that it is safe to assume that most AA labor groups are not as productive as their peers at other airlines and that productivity , not average pay, is the biggest driver of AA's labor cost problems.

As usual, the discussion turns to M&R with regards to productivity, pay and benefits. It is known that AA M&R are among the lowest paid in the industry. That discussion should stop. It is my firm belief, while I have no data to back it up, that the management ranks are top heavy all around the company. One can easily point to the number of VPs added since Crandall, each having their own fifedom. I can't say for sure about other departments or even other stations, but I can say with conviction, there has been a large increase in supervisory and staff personnel at DFW in AC Maint. I suspect the same is true in all other departments and stations including Hdq. It seems this is the cost of doing business?

If one were to break down the numbers by looking at the total number of employees, break out pilots, FA’s, and TWU. What’s left would be management and staff. Break out the agents from that and what remains is agents, management and staff. This could be done for other airlines and a comparison could be made. The numbers would be skewed in some areas because of contracting out. But an accurate comparison could be made for management because they don’t contract out their own jobs, only everyone else’s.

 

[Bob Owens]

It's not usually broken down by work group, but you can see ASM's produced per employee (taken as a whole) on several sites. AA trails the pack.

Because the industry has changed so much the only real way to compare productivity at AMR would be to compare past to present. Even then the figures would be unfavorably distorted against labor due to increased insourcing and 3P work. That said AMR has seen a huge increase in productivity, and those figures are a much more reliable indicator of whats going on at AMR than figures from other carriers where they sent work out. Other carriers outsourced most of their OH, this cut heads and gave a false indication of a productivity increase because now the actual labor was done by vendors but the costs would not be marked as labor costs. Trying to gauge productivity at those carriers that simply decided to outsource is pretty much impossible. I saw a figure from UAL where 13% of their total operating costs was "Maintenance and realted purchased services", and their Salaries was 22%. So combined it was $35% and that was in 2007, five years after massive outsourcing it was their 4th largest cost, behind Fuel, Labor, and regional affiliates. When combined with labor it surpassed fuel (26%).

 

[eolesen]

while I have no data to back it up, that the management ranks are top heavy all around the company. One can easily point to the number of VPs added since Crandall, each having their own fifedom. I can't say for sure about other departments or even other stations, but I can say with conviction, there has been a large increase in supervisory and staff personnel at DFW in AC Maint. I suspect the same is true in all other departments and stations including Hdq. It seems this is the cost of doing business?

I've posted several times here a comparison of AA and WN officers/VPs, and every year I've done this, the number of VP's at AMR has always matched the number at WN, which is arguably one of the best run airlines in existence.

With annual reports being out, maybe it's time to do again for some benchmarking, but I'd expect AA to still be towards the lean side.

Getting at supervisory ratios is a little more difficult. It's not broken out in the data submitted to the feds. Since supervisory headcount is entirely controllable by the company, I seriously doubt they'd be adding heads just for the sake of doing so. Getting headcount authorized in the past was like squeezing blood from a stone... Is it possible that you're just now paying more attention to it?...

 

[Bob Owens]

I've posted several times here a comparison of AA and WN officers/VPs, and every year I've done this, the number of VP's at AMR has always matched the number at WN, which is arguably one of the best run airlines in existence.

With annual reports being out, maybe it's time to do again for some benchmarking, but I'd expect AA to still be towards the lean side.

Getting at supervisory ratios is a little more difficult. It's not broken out in the data submitted to the feds. Since supervisory headcount is entirely controllable by the company, I seriously doubt they'd be adding heads just for the sake of doing so. Getting headcount authorized in the past was like squeezing blood from a stone... Is it possible that you're just now paying more attention to it?...

They are adding management at JFK. We have more now than we did in the past despite having fewer workers.

WT keeps going on about adding heads yet he doesnt produce anything to support his assertions that the Union forces the company to employ more then they choose to. I told local management a year ago, now that they exhausted recall I would prefer that they didnt add any heads, even as people attrit out. I'd rather see our guys get more OT instead of going to a second job. OT is a more efficient way of obtaining additional income because there's no lost time.

If you look at the recent TA at UAL and the contract at UPS, in both cases the company is agreeing to bring more work in house. While the companies are touting this as concessions to Labor I dont hear too much from members about wanting to see the company hire more people. Given the choice between hiring more workers and more pay I'd say its probably close to 100% in favor of more pay.

The airlines have dug themselves into a hole. They've driven thousands of their youngest mechanics out of the industry, most no longer willing to return, half the schools closed their doors, and now they are looking at ever increasing waves of people retiring. The airlines overplayed their hand, now they probably could not bring as much work back in house as they had before if they wanted to, and sending it to domestic MROs isnt really an option since they face an even tougher problem in that their workforce is the primary source of workers. They can send of the work overseas, for now, but as the World Economy expands that option will become more and more costly. AA, which didnt partake in the frenzy of outsourcing is having a hard time getting enough mechanics to meet their needs. The younger guys continue to leave the industry, the older guys continue to retire and the rest in the middle are just trying to ride it out,following the example set by the company of tryting to get as much as you can while giving the least you can get away with giving.

 

[eolesen]

Trying to gauge productivity at those carriers that simply decided to outsource is pretty much impossible

I don't disagree. But when you're looking at balance sheet reconciliations, you also have to remember that outsourcing reduces what the company is paying in social costs, e.g. healthcare & retirement. With that in consideration, I'd say there's a net positive to the company.

Instead of comparing companies against each other, do a year over year comparison for the same company, pre-outsourcing and post-outsourcing. Take the expense lines, divide per ASM, and when you compare, maybe the difference will be a little more obvious.

 

[TWU informer]

I don't disagree. But when you're looking at balance sheet reconciliations, you also have to remember that outsourcing reduces what the company is paying in social costs, e.g. healthcare & retirement. With that in consideration, I'd say there's a net positive to the company.

Instead of comparing companies against each other, do a year over year comparison for the same company, pre-outsourcing and post-outsourcing. Take the expense lines, divide per ASM, and when you compare, maybe the difference will be a little more obvious.

The same could be said for having less employees and paying overtime. Cheaper than the social cost. But because each AA empire is only concerned with their budget since it is consideration for personal reviews and bonus awards, it is much easier to get headcount increases in budget and keep overtime to a minimum. Combine that with Consulting Firm goals and measures posted in every area for a morning board walk, which overtime is seen as a negative measure.

So we have restrictions on overtime, and hiring and recall.

One policy works against the other to the detriment of us all.

 

[Kev3188]

The contractual labor loan and 3/7ths weekend coverage allowances was not what I was driving at, but they are seldom used. It was accountability, as there are no contractual limits to enforce it. There are those who do very little with impunity, knowing there will be nothing said. Sure, everyone's miffed about the contract but those that actually produce an honest days work are deflated by those who do not. The productivity and professionalism of the 90's are so foreign to today's workforce that they don't even believe it ever occurred.

I don't mean to sound dense, but what exactly is 3/7ths coverage?

As for the lack of accountability, and how it deflates others, I couldn't agree more. I'm well aware that it's the company that hires/fires/disciplines, but I'd like to see unions take a more proactive stance when it comes to holding the membership up to a higher standard. Unfortunately, that runs counter to dues collection, so it won't happen anytime soon...

Because the industry has changed so much the only real way to compare productivity at AMR would be to compare past to present.

When you say AA's workforce has become more productive than in the past, I don't doubt you for a second. That said, today they are still the least productive compared to DL, US, and UA/CO. Please note that I'm not equating productivity with work ethic.

If you look at the recent TA at UAL and the contract at UPS, in both cases the company is agreeing to bring more work in house. While the companies are touting this as concessions to Labor I dont hear too much from members about wanting to see the company hire more people. Given the choice between hiring more workers and more pay I'd say its probably close to 100% in favor of more pay.

I'd say you're right, regardless of carrier. Like my example above, though, that runs counter to the TWU's objective, which is increasing head count.

The question is as a company do you continue to pay guys OT, or do you hire lower scale guys in (factoring in their benefit costs as well). Option C is to get more work out of the existing compliment-which ostensibly would lead to more money shared by less people. I'm not advocating any of the above. What kind of workforce AA is to become is up to the employees to decide.

 

[FWAAA]

As usual, the discussion turns to M&R with regards to productivity, pay and benefits. It is known that AA M&R are among the lowest paid in the industry. That discussion should stop.

AA has not publicly talked about a lack of productivity among its maintenance employees like it has its pilots and flight attendants. The terms of those two workgroups' contracts give them, on average, more paid hours for fewer actual flight hours than at most other airlines, leading to AA's claim that those two workgroups are not very productive.

Not so with the AMTs. AMTs are scheduled for 40 hours a week, 52 weeks a year, less any vacation time earned, right? I guess it's possible that some show up for work and then don't do much work. If so, that's a management failure.

AA's AMTs have a wage rate that's among the lowest in the industry but there's two sides to that story. AA's line mechanics are very underpaid compared to UPS, FedEx and WN. AA's overhaul mechanics enjoy above-average pay compared to AMTs at stateside (domestic) MROs. As I've posted before, AA is probably not willing to pay its overhaul staff the same hourly pay that UPS, FedEX or even WN pays their line mechanics.

Overall, AA's employees may not be as productive as at AA's competitors. But that does not equal a claim that AA's maintenance employees are not as productive as maintenance employees at competitors.

 

[Birdman]

AA has not publicly talked about a lack of productivity among its maintenance employees like it has its pilots and flight attendants. The terms of those two workgroups' contracts give them, on average, more paid hours for fewer actual flight hours than at most other airlines, leading to AA's claim that those two workgroups are not very productive.

Not so with the AMTs. AMTs are scheduled for 40 hours a week, 52 weeks a year, less any vacation time earned, right? I guess it's possible that some show up for work and then don't do much work. If so, that's a management failure.

AA's AMTs have a wage rate that's among the lowest in the industry but there's two sides to that story. AA's line mechanics are very underpaid compared to UPS, FedEx and WN. AA's overhaul mechanics enjoy above-average pay compared to AMTs at stateside (domestic) MROs. As I've posted before, AA is probably not willing to pay its overhaul staff the same hourly pay that UPS, FedEX or even WN pays their line mechanics.
Overall, AA's employees may not be as productive as at AA's competitors. But that does not equal a claim that AA's maintenance employees are not as productive as maintenance employees at competitors.

AA has publicly stated that it has, including M&R, the highest labor costs in the industry and an interpretaion of it's meaning has been thoroughly debated. Their own negotiations website states AA mechanics are above median pay but when put to the calculator we fall $2 below median. I can assure you they know full well that their Tulsa base mechanics are far below their productivity potential but they don't want to address it in negotiations. I believe it's because they want to achieve a neutral cost contract first and then address productivity as an uncompensated bonus. It's strange to me that some use comparisons between the majors inhouse maintenance and MROs. I am unaware that AA's mechanics have ever competed with MRO's for work on their own aircraft. AA will never turn a profit doing maintenance on their own a/c so why should we compare wage rates with businesses that must make a profit to survive?