American Airlines is set to resume contract negotiations with pilots

E and AAviator,

Bingo, we have a winner!

WorldT, my previous point regarding the 70+ paysclaes is that they aren't sustainable and a product of the post 9/11 cutbacks. The pilot supply market is very slow reacting, the pipeline was still pumping out for a few years based on the late 1990's boom and cheap credit for those borrowing $100k for a $15K starting job. Those days are gone, the pipeline is dry. We've already seen the effects of crap pilot wages in the regionals. Same thing worldwide. Honestly, the seniority system has killed pilot wages for the last 10 years because everybody has been willing to work for free in the hope they become the next SWA. I'm sure airline managers with a brain would be producing cinder blocks from the aft intestinal tract if we went to system hiring pilots based on the highest bidder. It may come to that.

True story. A furloughed AA pilot was Captain at Eagle. Climbing out in weather in an EMB, he notices the FO staring out the window at the blank white as they were in the clouds.

CA: What are you looking at?
FO: The inside of the clouds, I've never seen that before.

There is your "Market Rate" of todays wages and the quality it attracts.
 
Mach,
good conversation....
yes, you are right that the supply of cheap pilots is drying up... airlines negotiate union contracts for 4 years or so and if they are lucky they can drag out a pay raise for a couple years after that... but they sign contracts to buy aircraft with a life expectancy of 20 years. Thus, they cannot sign up for a bunch of regional jets with pilot costs that could make even 70 or 100 seaters uneconomical in 5 years.
While some of the network carriers can afford to pay slightly below the industry average, the pool of pilots willing to work even at below average mainline rates will shrink.. meaning all of the mainline carriers will be paying alot closer to the industry average than perhaps exists now. Thus, I agree w/ you that the chances of adding a bunch of lower paid mainline pilots to fly 70 or 90 seaters is not really viable longterm, in part because the problems in the airline industry will force labor rates for pilots higher.
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Keep in mind that the whole reason why the regional jet surfaced in the first place was to expand airline networks and then particularly after 9/11, to maintain the network footprint when demand fell off rapidly.
But as we have seen RJs are not cost efficient on a CASM basis and as the industry becomes more and more priced by low fare carriers - including markets which are not served by low fare carriers but which are too close to cities that do have low fare service to allow signfiicant fare differences - the ability to have higher cost segment of the industry relative to mainline will be harder to sustain.
For now, the CR9 and E175 in 76 seat configs and flown by regional carriers have costs reasonably close to mainline costs. The 50 seaters are signficantly higher CASM aircraft and thus are not sustainable esp. as fuel continues to flirt w/ $3/gal on a regular basis.
Thus, part of the benefit of mergers was the consolidation of hubs, eliminating the need to serve a lot of markets that were sustained only by 50 seaters.
DL has taken the lead in reducing 50 seat flying as it has cut some of its smaller hubs and shifted capacity onto mainline and larger RJs.
UA/CO will probably exit alot of smaller markets in time but they do not seem to be as focused on having the breadth of the domestic network that DL has; UA's domestic presence is much more heavily focused on local traffic in their largest hub markets while DL carries a lot more connecting traffic including from small and mid-sized markets.

There will be less and less need for the depth of RJ flying and as labor costs creep up the airlines that have rebuilt their domestic systems with the greatest amount of mainline flying - and the least dependence on RJs - will be the ones that will be most likely to win in the domestic market against WN - which now carries about 25% of the domestic market and has no RJ issues or lack of interested pilot candidates.
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Just because ground services for regional carriers is provided by mainline employees does not mean the costs cannot be competitive.
DL insourced RJ handling to DL employees in several major hubs - above and below wing. As long as you scale the staffing to the size of the aircraft, costs can work.
DL maintenance also does some of the work for some of its RJ partnerss... it does RJ engine overhauls for example but it doesn't do airframe overhauls, the same function it doesn't do on its fleet inhouse.
 
The real Dodo bird here is the use of AA's mechanics for overhaul. As much as I loathe the idea of a foreign shop for heavy checks, well, if you can't beat 'em, join 'em!

Short of evidence to back up your assumptive statements I think you might be the Dodo bird.
 
How easy would it be for AA to go back to the 12 month recurrent for pilots instead of the 9 month recurrent? Just for a temporary time to get back on track. Would the APA need to agree to that as well? I'm sure that APA would be all over that and we would see some new billboards about how AA doesn't believe in safety or something, but it might be a workable idea. If it was APFA that had this decision to make, I too would be lighting up the union phone line and telling them HE!! NO! Best outcome would be for AA to get serious and get a TA this week if they want any help. Followed by the BOD kicking these bums out on their arses as fast as possible.
 
How easy would it be for AA to go back to the 12 month recurrent for pilots instead of the 9 month recurrent?


My honest, no B.S., no political, no games opinion is that that is a bad idea. Even at 9 months the memory and flow to complete emergency tasks is fading quick. Personally, I would prefer to go to 12 months if it was workable, but it's not. Like most guys/gals, I can't stand going to that "puzzle palace".

Besides that, any change of that magnitude amounts to moving the large FAA glacier from one valley to the next. I think it would take several years to do.

I do shake my head at the failure to embrace distance learning for 2 of the 4 day recurrent. Electronic means, Skype, ect could easily replace the need to physically attend. The stumbling block? AA wants us to do it for free on off days. Pay a guy straight hourly rates for the time involved, and 99% will do it on their off days and fly more.
 
Evidence? Really? :rolleyes:

Ok, where are UAL and DAL doing all of their overhaul? 100% in house?

C'mon man..

First you assume that UAL and DAL does no heavy maintenance on their own a/c. That would be incorrect. Next you assume it's cheaper to outsource with no financial data to substantiate your claim. Only management has the specific data to support either claim and they're not sharing. Apparently not even our CEO can verify your claim as he has been quoted as saying "The jury is still out". Nothing against the pilots as they are worth whatever they can get, but there appears to be more evidence that their productivity, work rules , and pay contribute more to the compAAny's original $600 mil disadvantage than maintenance. If you can prove different with solid financial reports I'm all ears.
 
Nothing against the pilots as they are worth whatever they can get, but there appears to be more evidence that their productivity, work rules , and pay contribute more to the compAAny's original $600 mil disadvantage than maintenance. If you can prove different with solid financial reports I'm all ears.

I don't know the maintenance comparisons, but if you want to know the facts of pilot cost comparisons, spend a little time with the charts at Airline Financials.Com .

As I've admitted in previous posts, there are productivity issues that will be agreed to that will work for AA and APA. The normal retirement numbers coming shortly will mitigate any APA job loss concerns. Some productivity issues are AA's problem. Any pilot would love 82+ hours in 12 days like SWA. AA schedules that in 15-16 days. Quick turns like SWA? Out of APA's control. Small jet costs? APA could have the FO working for $5 hour and the numbers still wouldn't work unless TWU/MX/APFA get onboard. We already tried that with the CRJ900 by offering lowball rates.

Another productivity issue that will improve with retirements is sick leave use and vacations. Our group is old and gets sick more than the retiree replacements will be and also affects the numbers when comparing to other pilot groups. Training? I covered that. Different fleet types? I've heard AA lumps in everything on pilot costs while ignoring they bought all the fleet types and the costs involved.

Everybody is getting beat up with compensation comparisons. It sucks for everybody. However, AA pilot pay isn't as far as some would like to believe when compared nationally and even worldwide. I don't like it anymore than you do, but Tulsa's numbers probably don't compare very well worldwide.
 
First you assume that UAL and DAL does no heavy maintenance on their own a/c. That would be incorrect.

United and Delta both still do plenty of maintenance, but the reality is that neither of them has the equivalent of a TULE (or even an AFW, for that matter) that they are paying for and using to perform MBVs on virtually any portion of their fleet.

Next you assume it's cheaper to outsource with no financial data to substantiate your claim. Only management has the specific data to support either claim and they're not sharing.

I'm a simple guy, so - admittedly - I'm using rough math and what I would consider common sense here.

But if a plane is going in for an MBV that entails materiel and thousands of man-hours of touch labor, it just seems like common sense that it would be cheaper to do that non-unionized and/or lower-$/hour in El Salvador, Hong Kong, Beijing, TIMCO, etc. than in unionized Tulsa or Fort Worth. Perhaps I'm wrong in that assumption - but I don't see how it's possible that a guy working on a jet in China could possibly cost more than a guy working on a jet in Texas.

I realize there is the downtime and ferry time issue - true - but can Tulsa really overhaul a 737 appreciably faster than TIMCO? If the ferry time to get the jet from TUL to DFW is, say, 1 hour, and the ferry from, say, SAL to DFW is 5 hours, do those extra 4 hours of flight time really add so much cost as to overwhelm thousands of man-hours of lower labor rates?

And, also, this doesn't take into account quality at all. Personally, while I'm fully know that their is plenty of excellent, high-quality maintenance performed all around the world, I myself definitely like now that when I step onto an AA plane (which I do quite often), that plane was maintained in the U.S., by an AMT directly employed by the airline, who is FAA-certified and speaks fluent English. Indeed, I am happily willing to pay a few more bucks for that knowledge. But - alas - do most other air travelers today feel as I do? I don't think so.

And as for the comment "only management has the specific data?" Seriously? The TWU doesn't estimate and benchmark what their competitors at TIMCO, HAECO, Aeroman, etc. cost to maintain planes? Wow - that's scary.

As I've admitted in previous posts, there are productivity issues that will be agreed to that will work for AA and APA. The normal retirement numbers coming shortly will mitigate any APA job loss concerns. Some productivity issues are AA's problem. Any pilot would love 82+ hours in 12 days like SWA. AA schedules that in 15-16 days. Quick turns like SWA? Out of APA's control. Small jet costs? APA could have the FO working for $5 hour and the numbers still wouldn't work unless TWU/MX/APFA get onboard. We already tried that with the CRJ900 by offering lowball rates.

I agree that much of the productivity improvements are not directly the responsibility of the unions or their contract, and that definitely the company itself has to take more responsibility for more efficiently scheduling the system and crews. (I know their are various factors at play, most of which I don't understand, but I agree that in many cases there must be a more efficient way.)

But there also are, as I think you are agreeing, areas where the APA contract (and the other contracts as well, but the APA most importantly) can be modified - probably in many cases at little or no negative impact on members - to give AA the greater flexibility and productivity it needs to help improve its network and finances.

Another productivity issue that will improve with retirements is sick leave use and vacations. Our group is old and gets sick more than the retiree replacements will be and also affects the numbers when comparing to other pilot groups.

Interesting. Makes sense.

Different fleet types? I've heard AA lumps in everything on pilot costs while ignoring they bought all the fleet types and the costs involved.

Luckily AA has done a good job of simplifying the fleet in the last decade, and that is continuing to improve. Comparing the fleet today versus the fleet ten years ago, the number of fleets and sub-fleets is greatly reduced. Indeed, with Continental now merging into United, AA has pretty much the most simplified and standardized fleet of any of the legacy carriers, and with the new 737s and A320s arriving soon, and ultimately replacing three more fleet types (and, by my uneducated count, at least six sub-fleets overall), that should drive the cost of fleet variation down even further.

Everybody is getting beat up with compensation comparisons. It sucks for everybody. However, AA pilot pay isn't as far as some would like to believe when compared nationally and even worldwide. I don't like it anymore than you do, but Tulsa's numbers probably don't compare very well worldwide.

I think that's pretty much true for most work groups at AA - not just the pilots, or the mechanics. In many cases the real competitive disadvantage with AA's labor "cost" isn't really much the direct labor "pay" but rather the efficiencies and flexibilities that other airlines have been able to achieve through bankruptcy. As has been discussed endlessly here, in many cases AA's employees indeed aren't the highest-paid among legacy carriers (although most AA pay groups, on average, still make more, no average, than comparable groups at most low-fare airlines). I sincerely hope that the company and the unions can find a way to fairly and equitably trade off higher base pay per employee against productivity per employee, and flexibility for the enterprise - which will, over the long-term, benefit both the company and the employees.
 
I realize there is the downtime and ferry time issue - true - but can Tulsa really overhaul a 737 appreciably faster than TIMCO? If the ferry time to get the jet from TUL to DFW is, say, 1 hour, and the ferry from, say, SAL to DFW is 5 hours, do those extra 4 hours of flight time really add so much cost as to overwhelm thousands of man-hours of lower labor rates?

Ferry costs are only an issue if the MRO is located at an airport AA doesn't fly to with that fleet type.

DL's doing one of their 744 lines in PVG, and per one of my pilot friends there, they fly the planes heading into a heavy check inbound, and pick up the "fresh out of overhaul" plane on the way out.

With widebody overhaul in TUL at AFW pretty much guaranteeing a ferry flight, it's possible that the positioning cost of using a MRO in Asia might be lower, especially if you're able to do the In-N-Out swap as DL is apparently doing.

And as for the comment "only management has the specific data?" Seriously? The TWU doesn't estimate and benchmark what their competitors at TIMCO, HAECO, Aeroman, etc. cost to maintain planes? Wow - that's scary.

TWU probably doesn't, but I'd be shocked if the IAM or AMFA didn't already have that data. One of the triggers for outsourcing at Alaska was for insourcing to within X percent of cost neutral. Did they just accept management's word for it that their costs were higher?
 
Comm,
you probably should know that the size of AA's TUL maintenance base is 3.3M square feet, UA's SFO base is 2.9M SF, and DL's ATL maintenance base is 2.7M SF.
It is not quite accurate to say that no other airline has a facility on par w/ AA at TUL; facilities of that size exist in only a few places in the world and a couple hundred thousand SF doesn't change the capabilities or lack thereof.
But sheer floorspace doesn't dictate productivity anymore than fleet size directly correlates w/ the size of one's route network; therefore, you might also want to compare the size of what DL does.
ENGINE & COMPONENT OVERHAUL
•650+ Engine Overhaul Events per year (300+ MRO Customer Engines)
•12 Engine Types, 4 OEMs
•8,000+ different Aircraft and Engine Component Part Numbers served per year
•200,000+ Component Repairs per year

LINE MAINTENANCE & OPERATIONAL SUPPORT
•51 maintenance stations
◦29 domestic EASA Capable
◦22 international, 11 EASA Capable
•200,000+ Overnight Checks per year
•24/7/365 Maintenance Control Center

AIRCRAFT MAINTENANCE
•200+ Major Visits (PSV) per Year
•260+ Hangar Overnight Visits & Letter Checks per year
•200+ Modification & Paint Visits per year

I'd like to see the numbers for AA but note that half of the engine overhauls that DL does are contract work for other carriers... not hard to understand how DL manages to keep its maintenance costs down by using the facilities it decided to keep to perform the highest value work... and note that engine maintenance requires a whole lot less floorspace than airframe maintenance.
That's probably also how DL managed to become the largest airline MRO in the Americas and the 3rd largest in the world.

http://deltatechops.com/

Despite the fact that DL chooses to outsource much of its own AIRFRAME overhauls, it has still been rated as the best MRO in the Americas for both airframes and engines...

Thus, it isn't that other airlines don't have the capabilities but whether or not they choose to use them.

I don't think there is any evidence that AA maintenance has any more capabilities than either DL or UA but that they choose to use their resources differently... and both do so at lower costs.

As for fleet simplification, AA's fleet will be no less complex once it starts receiving its Airbuses and 787s than DL or UA are now... not sure about UA, but DL uses the diversity in its own fleet in order to provide a broader range of MRO services.
And as for fleet simplicity, there is no evidence that when you have fleet sizes as large as DL or UA have in their Airbus and Boeing fleet that there is a benefit in fleet simplification.

The same principle applies to efficiency w/ respect to maintenance.... there is no evidence that AA's maintenance costs are less because they don't operate more fleet types - the real inefficiency comes from having too many people for the amount of work they do.

Note that DL does everything except airframe overhauls on its own fleet which is larger than AA's and generates $500 million in outsourced revenue with 3000 less Tech Ops employees than AA.

The bottom line is that AA isn't using its maintenance capabilities efficiently and then turns around and argues that that AA's maintenance is not cost-competitive - and based on DOT data, AA pays a 66% premium to maintain its fleet compared to DL.

And yes I agree that it is inconceivable that the TWU doesn't know how efficient AA's maintenance operations are relative to its peers or to foreign MROs.
 
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Comm,
you probably should know that the size of AA's TUL maintenance base is 3.3M square feet, UA's SFO base is 2.9M SF, and DL's ATL maintenance base is 2.7M SF.
It is not quite accurate to say that no other airline has a facility on par w/ AA at TUL; facilities of that size exist in only a few places in the world and a couple hundred thousand SF doesn't change the capabilities or lack thereof.
But sheer floorspace doesn't dictate productivity anymore than fleet size directly correlates w/ the size of one's route network; therefore, you might also want to compare the size of what DL does.
ENGINE & COMPONENT OVERHAUL
•650+ Engine Overhaul Events per year (300+ MRO Customer Engines)
•12 Engine Types, 4 OEMs
•8,000+ different Aircraft and Engine Component Part Numbers served per year
•200,000+ Component Repairs per year

LINE MAINTENANCE & OPERATIONAL SUPPORT
•51 maintenance stations
◦29 domestic EASA Capable
◦22 international, 11 EASA Capable
•200,000+ Overnight Checks per year
•24/7/365 Maintenance Control Center

AIRCRAFT MAINTENANCE
•200+ Major Visits (PSV) per Year
•260+ Hangar Overnight Visits & Letter Checks per year
•200+ Modification & Paint Visits per year

I'd like to see the numbers for AA but note that half of the engine overhauls that DL does are contract work for other carriers... not hard to understand how DL manages to keep its maintenance costs down by using the facilities it decided to keep to perform the highest value work... and note that engine maintenance requires a whole lot less floorspace than airframe maintenance.
That's probably also how DL managed to become the largest airline MRO in the Americas and the 3rd largest in the world.

http://deltatechops.com/

Despite the fact that DL chooses to outsource much of its own AIRFRAME overhauls, it has still been rated as the best MRO in the Americas for both airframes and engines...

Thus, it isn't that other airlines don't have the capabilities but whether or not they choose to use them.

I don't think there is any evidence that AA maintenance has any more capabilities than either DL or UA but that they choose to use their resources differently... and both do so at lower costs.

As for fleet simplification, AA's fleet will be no less complex once it starts receiving its Airbuses and 787s than DL or UA are now... not sure about UA, but DL uses the diversity in its own fleet in order to provide a broader range of MRO services.
And as for fleet simplicity, there is no evidence that when you have fleet sizes as large as DL or UA have in their Airbus and Boeing fleet that there is a benefit in fleet simplification.

The same principle applies to efficiency w/ respect to maintenance.... there is no evidence that AA's maintenance costs are less because they don't operate more fleet types - the real inefficiency comes from having too many people for the amount of work they do.

Note that DL does everything except airframe overhauls on its own fleet which is larger than AA's and generates $500 million in outsourced revenue with 3000 less Tech Ops employees than AA.

The bottom line is that AA isn't using its maintenance capabilities efficiently and then turns around and argues that that AA's maintenance is not cost-competitive - and based on DOT data, AA pays a 66% premium to maintain its fleet compared to DL.

And yes I agree that it is inconceivable that the TWU doesn't know how efficient AA's maintenance operations are relative to its peers or to foreign MROs.

You can't leave out quality or what value is returned to the airline by doing the work in house. At AA, we are not doing so hot in M&E dependability. I think that is what many miss when it comes to discussing the whole picture of in-sourcing versus outsourcing. A company might be willing to spend more if as a result of higher quality maintenance there are fewer delays and cancellations due to maintenance and therefore fewer aircraft spares needed to back up schedule. Southwest and Continental have better numbers on delays and cancels than AA but they have all their engines outsourced at CAL and about half of their airframes. Southwest outsources all their engines and a majority of their airframes. AA is terrible by comparison and has to keep a small fleet of aircraft stationed around the system to cover for all the maintenance cancels and delays. AA would probably pay more if they didn't have to pay lease payments on 25+ aircraft sitting due to maintenance problems. Cutting maintenance spares in half would pay for a lot of what Owens wants he just can't connect the dots in his mind because he is so angry and vindictive.

The issue that surrounds much of the frustration is that it is not labor's fault alone. It starts with good leadership and AA is lacking that on both the union and management side. The sad thing is both of these people are married to each other. If AA outsources there will be fewer of all AA M&E employees. AA is not going to just outsource labor, it will be managers, admin, support, engineers, HR, ER, cleaners, facilities and auto mechanics, aircraft mechanics, stock clerks, etc...

What we need in business are labor and managment leadership that will create viable solutions that create an operating model that is beneficial to all of us. The employees, the investors, and most importantly the passengers who expect us to do our jobs the best we can.

I'll get off the soap box.
 
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outstanding Overspeed.
And since other airlines outsource parts if not all of their maintenance and still run a reliable operation then the issue isn't about outsourcing at all - as much as some people would like to think it comes down to personal pride in whether the workers pick up a check drawn on a US bank.
Maybe the real issue is how well the company manages and oversees its work - and those things DO translate into reliability regardless of who is doing the work.
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and yes, AA mgmt has been unable to make the tough choices and the TWU has been unable to justify the value it adds to AA... and not surprisingly they are not at a crisis point when the company might finally be forced to start throwing people overboard... and those that can most adequately justify their existence will be the ones that are retained.
When people or the company is backed into the corner, the decisions gets tougher than ever... and what could have been a good decision a few years ago is no longer possible today.
The time is yesterday to demonstrate what value each group of AA people add to the equation; pilots and their unions are always much more capable of articulating the value they add - the TWU should be able to do no less.
 
I realize there is the downtime and ferry time issue - true - but can Tulsa really overhaul a 737 appreciably faster than TIMCO? If the ferry time to get the jet from TUL to DFW is, say, 1 hour, and the ferry from, say, SAL to DFW is 5 hours, do those extra 4 hours of flight time really add so much cost as to overwhelm thousands of man-hours of lower labor rates?
It's interesting you would mention the 737. Last year our 737 manager and a couple of TWU reps participated, along with other airlines and MRO's, in a Boeing TOPICS program (Technical Operations Performance Improvement and Cost Solutions). In order to compare maintenance cost information it was necessary to synchronize all the different reporting methods. That accomplished, the results indicated that AA's costs were average compared to the group with one exception. AA's turn times were better than their competitors. This is only a small segment of overall maintenance costs and the big picture is hidden from view for obvious reasons.


And as for the comment "only management has the specific data?" Seriously? The TWU doesn't estimate and benchmark what their competitors at TIMCO, HAECO, Aeroman, etc. cost to maintain planes? Wow - that's scary.
Yes, it's scary that the TWU has never mentioned the TOPICS program results nor made any other effort to benchmark competitors.
 

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