American Airlines Is Too Profitable for Its Own Good
- Thread starter ContUNITEus
- Start date
With AA's chapter 11 filing, AA HAS leveled the playing field. I am not sure about the supposed benefits of this merger, DP has been singing the praises of this merger, but it will mean thousands laid off because of having one counter, less gates at some airports and less IT staff after a while.
US brings very little to the table, small hub cities, a very small wide body fleet and the routes they have are easily aquired if needed, US has no far east routes that have to be negotiated for, Europe for the most part is wide open.
Management is too heavily tilted with US people and my fear is that customer service will suffer. One thing going for US is their employee non-rev program,all flights free except for taxes without being a 25 year and plus employee.
I wonder how long this DOJ law suit will take?
JFK Fleet Service
Veteran
Kev3188
Veteran
Have you been on the DL forum lately? It's a ghost town...
robbedagain
Veteran
not sure given dl is gonna cut mem even more and over 100 folks out of jobs n all that without a union or scope
WorldTraveler
Corn Field
- Dec 5, 2003
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Let me help you understand why, Kev.
Five years after the merger, we still have a minority of people, most of which are not even DL employees who are trying to convince DL employees how bad they have it and have used the DL forum solely for that purpose.
Problem is that DL people see themselves as doing pretty good… and dividing a cool quarter of a billion dollars in profit sharing for just one quarter’s work doesn’t exactly further union organizer’s claims that DL employees are hurting. Add in that DL expects further profits this year that will be allocated to profit sharing on a 20% of earnings basis and it is really hard to argue that DL employees need unions, yet there are people who keep trying to push that agenda.
DL people are doing well because the company is kicking tails in the marketplace and is delivering a service that customers are willing to pay a premium to use. DL employees, just like their unionized counterparts at WN, get it and support their employers efforts and aren’t interested in messing with the formula that is helping them win and win big.
The DL forum is a ghost town in your mind because successful business issues don’t get a lot of press.
You see the same thing on the WN and B6 forums… UA is being kept alive right now based on an online inquisition of someone who is going to bat for his peers at another airline.
They will be offered jobs elsewhere just as has happened at other airlines. Many airline employees have voluntarily moved to advance their careers but it is apparently immoral to allow the company to ask an employee to move to retain their jobs.
You do realize that CBA’s were completely ineffective at retaining 5000 or so jobs at AA over the past two years? You also realize that the aforementioned inquisition of Tim Nelson is because UA refuses to provide anywhere close to the job security that they should offer? You do realize that even without CBAs, DL employees work at more airports than any other network carrier?
I think you’re the one who is worried…. You seem preoccupied by what I do in sleep. Seems a tad “over the line” to me.
The real issue is that you and folks like AANOTOK are apparently afraid to know or hear the truth. After all, you gave at the office TWICE so you can just let concessions run their course and then you’ll get back to the business of making money as AA employees again, right?
Wrong.
The problem is that there are dynamics in the airline industry that were set up well before deregulation and which have been basically unchanged since. Among those are that AA and UA are the highest cost producers in the industry, which has meant a whole flock of airlines have continued to circle both to pick off prime revenue. Airlines are enough of a commodity provider that those with the lowest cost ultimately win. Sure, there is a size and revenue component that helps retain customers, all things being equal but there is no evidence that size or revenue synergies can overcome high costs.
And, 2 years after AMR entered BK, it is in exactly the same relative position as it was with respect to costs in the industry – undercut by the low cost carriers and, yes, by Delta. AA and UA have swapped positions over the years and likely will continue to do so, but two years after bankruptcy, AA does not have a cost advantage to DL or low fare carriers.
Given that AA and UA’s route system has been built around the largest and most heavily competitive cities in the US, being cost uncompetitive matters… a whole lot. The whole reason why AA continues to shrink at JFK is because they are undercut by B6 who has costs that are close to 20% lower than AA and by DL which continues to grow based in part on DL’s lower costs.
The same problem exists for AA in N. Texas as the Wright Amendment falls. As much as AApologists want to try to convince us otherwise, WN has a 15% of so CASM advantage over AA and can do significant damage to AA solely on the basis of focusing a relatively few resources in AA’s most lucrative markets where WN has been shown to be able to win over key revenue.
Not only do the latest quarterly reports show that DL has a 6% mainline cost advantage over AA but DL also has a significant revenue advantage to AA which continues to grow – as DL continues to focus its strategic efforts on winning AA’s key corporate revenue in markets like NYC-LHR where AA has long had a near monopoly. DL said on the conference call that margins for LHR are very strong and growing. That is not good news for AA. When DL says that its corporate revenue growth continues to outpace the industry esp. from NYC, that is not good for AA. Some of that growth is probably coming from UA but industry data clearly shows that DL’s revenue in NYC is growing at AA’s expense.
Now that AA and DL seem to be setting up for a pushing match in LAX and on the west coast, the long-term prospects for AA to hold onto its position in other large and strategically important markets are cloudy for anyone who wants to look at the facts.
The simple fact is that AA hasn’t successively competed in the highest profile markets on its network for years…. LHR and Latin America are limited access markets as is DFW. That is why the combination of the three all changing is very bad news for AA. Add in that they feel like they need to build a presence to Asia right now and they are diverting valuable financial resources when they should be solving their long-term competitive problems.
The good news for AA is that UA’s costs continue to grow as a result of its merger integration processes and AA does have the opportunity to regain some of the revenue that it has lost to UA and perhaps still more.
Even if AA manages to pull revenue from UA, it doesn’t change that AA is being undercut from below (on the cost structure) by DL and a host of low fare carriers including crosstown rival WN.
The fact that this industry dynamic hasn’t been corrected despite AA’s two trips thru restructuring, one of which was in court, means that the same issues that have plagued AA will continue to do so.
AA employees are setting themselves up for a division within the industry that aligns them with US employees far more than they would like to think precisely because AA’s network, just like US’of 10 yeas ago, had a lot of exposure to high profile cities. US retreated to smaller but more protected markets and cut employee pay. US is profitable.
AA still is heavily exposed competitively in the largest markets but its employees are now moving far down the scale in terms of compensation.
AA’s current employees might find the merger with US to one of equals much more than they would like to admit.
BTW, I don’t wear jammies.
Again, not when AA is being undercut in costs by a network competitor who is larger and a couple of low fare carriers including at JFK where AA is trying to not completely throw in the towel and in Dallas where AA’s crosstown rival is getting ready for one of the most significant competitive bouts this industry has seen.
I really would like for you as AA employees to find some smooth air and for the captain to be able to turn the seat belt sign off. I’ve been talking about the threats to AA’s future for years on here and I have indeed been right. The fundamental issues that have plagued AA for years haven’t been solved and in fact they are about ready to step up to a whole new level.
It’s more than a little early to proclaim that the playing field has been or will be levelled.
Better keep the seat belt fastened.
robbedagain
Veteran
But there only goin to be soo many openings system wide and if they keep cutting city after city there wont be room
Kev3188
Veteran
...Of course none of that has to do with your nearly unblemished track record of bulldozing through nearly every topic over there, right?.
Not everyone has the tolerance to wade through your often insufferable paeans to the Widget, so they wander over to other boards where topics are given actual room to breathe, or quit visiting the site all together.
BTW, you ever think it's not the message you're delivering, but *how* you're delivering it? You should.
So yeah, a ghost town...
WorldTraveler
Corn Field
- Dec 5, 2003
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robbed,
except that DL isn't closing city after city and you know it unless you haven't read or chosen to ignbore the facts that have been repeatedly presented here.
DL is increasing system capacity and more significantly they are adding flights on DL aircraft while cutting capacity flown by Delta Connection carriers.
Of course it is the method I use, Kevin... second only to the fact that I am right and there are others who consistently refuse to admit that I am right.
robbed's statement above is a great example.
He is a great guy but it is as factually wrong to argue that DL employees are going to run out of places to be displaced from as it is for those who defend that AA will fix its strategic problems in the Pacific by throwing more capacity at the region.
BTW, US just released its financial report AFTER I posted my thoughts on the cost issue - and lo and behold, US' mainline CASM ex-fuel and specials is higher than DL's.
So, we now have AA and US people holding hope that a merger or AA's standalone plan will save them when they choose to ignore that the most fundamental statistic in determining long-term competitive success in the industry gives DL an advantage among network carriers. And it doesn't change that AA and :US are not getting revenue of the quality that DL is getting or that DL continues to grow its revenue in key AA and US markets because passengers are choosing to fly with Delta.
Sure, I'll back off my tone when people recognize that there are genuine, very real business issues at play that are continually being glossed over on here and in the published avaition media which are much, much larger predictors of success than the issues which people here seem to want to highlight.
You're a smart guy, Kev, and so is robbed, and there are plenty of others on this board as well with good brains on their heads... but the business issues are what drives the business and as long as they are ignored, there will be a place for me to bring them up. When there are people who take cheap shots to try to discredit my knowledge of the industry, it only emboldens me to keep writing to prove them wrong.
Where is your outrage for that kind of behavior?
There are dozens of threads on business issues that you can choose to participate in and I would like you to.... but remember that people have said here and elsewhere that they are tired of seeing every thread turned into a labor-mgmt push.
Nobody has been pushed off of anything on the DL or AA forum or anywhere else in life. But when someone points out facts that others refuse to acknowledge to be true, then it should come as no surprise that they have no choice but to either give up or continue to be challenged on the inaccurate information they post.
You and others have had many opportunities to not only admit that I was right but admit that you are wrong. We have people who have advocated the need for some to apologize, but I have yet to see people apologize for slamming my character because they haven't like what I have said - despite the fact that I have consistently been right about the key issues that have faced the industry.
It would be nice if you and others who say you want a peaceful board, and I genuinely believe you do, would be just as forceful in personally admitting that perhaps there are others that understand some things better, including the business of aviation, instead of attacking those who speak the truth or standing by cheering those who do.
I have no problem w/ admitting there are people in other parts of the company or industry that have knowledge and perspectives that I don't have - and regularly invite them to contribute.
You will "benefit" from the climate you create on the board.
except that DL isn't closing city after city and you know it unless you haven't read or chosen to ignbore the facts that have been repeatedly presented here.
DL is increasing system capacity and more significantly they are adding flights on DL aircraft while cutting capacity flown by Delta Connection carriers.
Of course it is the method I use, Kevin... second only to the fact that I am right and there are others who consistently refuse to admit that I am right.
robbed's statement above is a great example.
He is a great guy but it is as factually wrong to argue that DL employees are going to run out of places to be displaced from as it is for those who defend that AA will fix its strategic problems in the Pacific by throwing more capacity at the region.
BTW, US just released its financial report AFTER I posted my thoughts on the cost issue - and lo and behold, US' mainline CASM ex-fuel and specials is higher than DL's.
So, we now have AA and US people holding hope that a merger or AA's standalone plan will save them when they choose to ignore that the most fundamental statistic in determining long-term competitive success in the industry gives DL an advantage among network carriers. And it doesn't change that AA and :US are not getting revenue of the quality that DL is getting or that DL continues to grow its revenue in key AA and US markets because passengers are choosing to fly with Delta.
Sure, I'll back off my tone when people recognize that there are genuine, very real business issues at play that are continually being glossed over on here and in the published avaition media which are much, much larger predictors of success than the issues which people here seem to want to highlight.
You're a smart guy, Kev, and so is robbed, and there are plenty of others on this board as well with good brains on their heads... but the business issues are what drives the business and as long as they are ignored, there will be a place for me to bring them up. When there are people who take cheap shots to try to discredit my knowledge of the industry, it only emboldens me to keep writing to prove them wrong.
Where is your outrage for that kind of behavior?
There are dozens of threads on business issues that you can choose to participate in and I would like you to.... but remember that people have said here and elsewhere that they are tired of seeing every thread turned into a labor-mgmt push.
Nobody has been pushed off of anything on the DL or AA forum or anywhere else in life. But when someone points out facts that others refuse to acknowledge to be true, then it should come as no surprise that they have no choice but to either give up or continue to be challenged on the inaccurate information they post.
You and others have had many opportunities to not only admit that I was right but admit that you are wrong. We have people who have advocated the need for some to apologize, but I have yet to see people apologize for slamming my character because they haven't like what I have said - despite the fact that I have consistently been right about the key issues that have faced the industry.
It would be nice if you and others who say you want a peaceful board, and I genuinely believe you do, would be just as forceful in personally admitting that perhaps there are others that understand some things better, including the business of aviation, instead of attacking those who speak the truth or standing by cheering those who do.
I have no problem w/ admitting there are people in other parts of the company or industry that have knowledge and perspectives that I don't have - and regularly invite them to contribute.
You will "benefit" from the climate you create on the board.
Kev3188
Veteran
enough already
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- Jan 8, 2003
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WorldTraveler
Corn Field
- Dec 5, 2003
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how about you instead apologize for your OWN actions, Kev?
Wouldn't it be NOVEL - first time - for you to admit that you have pushed an agenda that the majority of DL employees don't want and that is why the DL forum has little activity?
Wouldn't be nice if you were a big enough man to admit you were wrong in your belief that DL employees had an interest in the labor unions that matter to you - but I'm not holding my breath.
You have tried to push a labor agenda and look for every opportunity to refuse to acknowledge that DL is running the company the way DL employees want. And both sides are benefitting; only the unions are left out of the picture.
Add in that the labor movement at other airlines has a track record that DL employees want absolutely nothing to do with - but you've never been willing to say that is why DL employees are'n't interested in what you and the rest of labor leaders are selling. There is a reason why DL employees have shut the door on increased union activity time after time in the largest employee groups at DL.
Grow a set and apologize for your own actions, misjudgments, and failure to create a decent climate on the board instead of the actions of someone else.
Admit that you have done nothing to foster the kind of environment that you say you want on this board and in fact you have fanned the flames of discord.
The AA forum can return to being just a sniping match between warring unions who want to claim they can do a better job of protecting the company from taking from employees or we can talk about the real business reasons why AA employees are now and will continue to see their status within the industry diminish.
I'm happy to sit back and watch the unions knock each other silly while companies that actually have their 2343 together take bigger pieces out of the hides of airline employees.
But I would far rather than people here understand that there are real business reasons that explain why AA employees are in the position and that the lives of AA employees won't improve until those issues are resolved.
WT, you might as well accept the fact that most people on this forum have their minds made up and do not wish to be confused by facts. Quoting from the quarterly financials--which do not involve book cooking as much as they would like to believe it does (it's not nice to fool Mother Federal Government)--is as meaningless to most of these people as quoting from the CBA that controls their work lives.
I've learned as an AA flight attendant that most AA flight attendants (so those of you who do read the TA, don't get your panties in a wad) read no further than the pay rate chart on one of the first 5 pages of a TA. If according to the proposed pay rates, we are getting a "raise", they decide to vote FOR the TA.
Our latest "raise" (3.5%) meant a $90/mo raise for me based on an 80 hour month. That is before deductions. Just my insurance premium (for less coverage I might add) went from $38/mo to $112/mo. We gave up having 5 guaranteed 2-day off blocks in each month for 10 1-day off blocks. Result a line on the DFW November bid sheet that had 12 days of flying in 13 days--6 on, 1 off, 6 on. And, it was perfectly legal. And, I've had 3 f/as express their outrage to me over how that line was illegal because...they then start quoting from what they heard in the galley about the previous CBA.
So, don't expect data from the 10-K to mean anything to most of these people. You might as well be speaking Urdu.
Just keep posting the facts. It drives them crazy.
Yes, from a business standpoint, AA standalone/AA+US is in peril. And, the current management regime has no ideas other than cutting employee pay and benefits. If we aren't making any money on a non-stop flight from Boise, Idaho to Hong Kong. it must be because we pay the employees too much. The fact that there is no market for such a flight is immaterial. If someone at Centerport pushed this route because they discovered that no one else was serving that route, well that's good enough.
(Yes, I know there's no such flight. It's called sarcasm.)
I've learned as an AA flight attendant that most AA flight attendants (so those of you who do read the TA, don't get your panties in a wad) read no further than the pay rate chart on one of the first 5 pages of a TA. If according to the proposed pay rates, we are getting a "raise", they decide to vote FOR the TA.
Our latest "raise" (3.5%) meant a $90/mo raise for me based on an 80 hour month. That is before deductions. Just my insurance premium (for less coverage I might add) went from $38/mo to $112/mo. We gave up having 5 guaranteed 2-day off blocks in each month for 10 1-day off blocks. Result a line on the DFW November bid sheet that had 12 days of flying in 13 days--6 on, 1 off, 6 on. And, it was perfectly legal. And, I've had 3 f/as express their outrage to me over how that line was illegal because...they then start quoting from what they heard in the galley about the previous CBA.
So, don't expect data from the 10-K to mean anything to most of these people. You might as well be speaking Urdu.
Just keep posting the facts. It drives them crazy.
Yes, from a business standpoint, AA standalone/AA+US is in peril. And, the current management regime has no ideas other than cutting employee pay and benefits. If we aren't making any money on a non-stop flight from Boise, Idaho to Hong Kong. it must be because we pay the employees too much. The fact that there is no market for such a flight is immaterial. If someone at Centerport pushed this route because they discovered that no one else was serving that route, well that's good enough.
(Yes, I know there's no such flight. It's called sarcasm.)
But US' profit margin on Transatlantic and Latin America is the highest in the industy of the legacy carriers.
And US just posted record profits, DL is the 2nd largest airline and US is the 5th, compare apples to apples, not oranges.
Atlantic
AA - 16.00 - 14.96 - 14.70 - 6.9%
DL - 14.02 - 12.39 - 13.79 - 11.2%
UA - 15.94 - 14.61 - 15.98 - 9.1%
US - 15.41 - 13.83 - 13.56 - 11.4%
Latin
AA - 17.55 - 15.57 - 16.61 - 12.6%
DL - 14.04 - 14.64 - 14.30 - (-4.1%)
UA - 16.45 - 15.39 - 16.07 - 6.8%
US - 19.21 - 16.84 - 15.08 - 14.1%
And US just posted record profits, DL is the 2nd largest airline and US is the 5th, compare apples to apples, not oranges.
Atlantic
AA - 16.00 - 14.96 - 14.70 - 6.9%
DL - 14.02 - 12.39 - 13.79 - 11.2%
UA - 15.94 - 14.61 - 15.98 - 9.1%
US - 15.41 - 13.83 - 13.56 - 11.4%
Latin
AA - 17.55 - 15.57 - 16.61 - 12.6%
DL - 14.04 - 14.64 - 14.30 - (-4.1%)
UA - 16.45 - 15.39 - 16.07 - 6.8%
US - 19.21 - 16.84 - 15.08 - 14.1%
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