So if one excepts the proposition that AA needs to have competitive costs and a competitive business model in order to survive, then what are you suggesting is the answer? A less labor-intensive business model? That, to me, would mean layoffs. Is that preferable?
You dont appear to be getting the picture, AA has a different business model, you dont take item by item to say which model is best you take the end result. AA's CASMs are competitive according to AA for the service they sell. The higher labor costs offset what what they would pay if they paid some vendor to provide the labor. UALs total costs for maintenance increased when they sent out their OH.
AA could probably do with a smaller workforce, but layoffs would be unwise. They are losing enough people as it is and it would be better to buy out the older guys than to lay off the already trained younger guys who will likely permanently leave the industry. Even with 9% unemployment the rate of decline for recall is exceptionally high, thats why the TA has unlimited recall.
And that sounds good in theory - but here's the problem: even when you add up the different categories, AA is still not competitive. I guess what I'm saying is that - regardless of how the dollars are accounted for, and which bucket they're put in, at the end of the day, all of that added up still costs more per unit of capacity at AMR than at other airlines. By my math - correct me if I'm wrong - when you add together the labor + maintenance expense reported by the 5 network airlines for 2Q09, AA's labor+maintenance unit cost is the highest among them excepting UA. And that's just the 5 network carriers - if you compare AA to huge competitors like B6, WN, F9, FL, etc., I'm guessing the disparity would be greater.
Well what you need to look at are the items where there should be no real difference, such as what they pay for leases to termianls, aircraft, how much they spend building new terminals, refurbishing existsing terminals, new cabins, winglets and other expenses. You would also have to factor in the fleet types, having a varied fleet drives up costs, having first class drives up costs (less ASMs), some of these things allow AA to generate more revenue but some only look at the costs. The fact is that AA brings in billions more than they used to, they outsource less and have fewer employees. All that money isnt going to its workforce , somebody is getting it and that where the cost problem is.
How are other carriers reconsidering their maintenance business models? They all seem to be satisfied enough with the outsourced overhauls and allegedly "less labor intensive" business models today that none of them have yet switched back to doing that work in-house. It is a bit telling that AMR is now the only U.S. carrier doing all of its overhauls in-house, no?
AA is not the only carrier that does overhaul, they do more than any onther carrier. There's a difference. Jet Blue is building a maintenance base in Florida, thats what they told their mechanics, apparantly they arent that happy with the quality of the work from El Salvador (staffing in New York is a problem, some of the mechanics are only staying so they can go to Florida) and they are concerned about new legislation on foreign maintenance. UPS offered language, and $46.99/hr to bring more work in house as well. Those are two examples. Right now the FAA is focused on AA, the other carriers are nervously waiting for their turn to come under scrutiny.
