AMR loses $389 million in 2010, excluding special items

[FWAAA]

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

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

Sounds like an oxymoron, but whatever.

According to airlinefinancials.com, AA's 2009 management expense was $78 million. If they worked for free or they were all fired and not replaced, AMR would still have lost over $300 million.

Don't have 2010 numbers yet, but given AMR's stock price performance, I'd bet it will be about the same.

 

[Hopeful]

Sounds like an oxymoron, but whatever.

According to airlinefinancials.com, AA's 2009 management expense was $78 million. If they worked for free or they were all fired and not replaced, AMR would still have lost over $300 million.

Don't have 2010 numbers yet, but given AMR's stock price performance, I'd bet it will be about the same.

Has nothing to do with productivity.
How do you gauge their productivity?

 

[FWAAA]

Has nothing to do with productivity.
How do you gauge their productivity?

I couldn't care less how productive management is, since they aren't clamoring for raises and their bosses (the board of directors) aren't demanding concessions of them. On top of that, the entire group's wage expense is no more than a rounding error in a $22 billion company.

Notice how AA management isn't banging the drum on the subject of TWU productivity on the aanegotiations website? Meanwhile, AA is complaining about the lack of productivity in the pilot and FA workgroups.

If anyone cares, you could compare managment expenses of AA to DL, UA, etc. and compare the financial performance of those companies over the past few years (or last quarter if you're short-sighted). Bob Herbst's website has the data, so have at it.

 

[TWU informer]

I couldn't care less how productive management is, since they aren't clamoring for raises and their bosses (the board of directors) aren't demanding concessions of them. On top of that, the entire group's wage expense is no more than a rounding error in a $22 billion company.

Notice how AA management isn't banging the drum on the subject of TWU productivity on the aanegotiations website? Meanwhile, AA is complaining about the lack of productivity in the pilot and FA workgroups.

If anyone cares, you could compare managment expenses of AA to DL, UA, etc. and compare the financial performance of those companies over the past few years (or last quarter if you're short-sighted). Bob Herbst's website has the data, so have at it.

There is more to it than clamoring for raises. There are more instances than not in Management at the Tulsa Base that a warm body has been placed into a management position and they cannot do their respective job. This not only drains profits and increases expense, it also requires someone else to perform that function. Which doubles the cost of the function. I am not just bitching either, this is FACT!

To be fair, the Union advocates the same damn thing. In fact, many of the recently transfered from MCI have no clue how to do the job they were plugged into, but someone signed them all off on the qualification test before they left, so on paper they are qualified in reality nada. Upgrades are no longer tested, they are trained.

The whole damn base is now full of union and management folks that cannot do the job they are assigned. In fact, the quantity of this type is rapidly creating an impossible burden on those that can.

And you want me to subsidize this ignorance with what from my pay and benefits? HELL NO I am tired of this crap! You see there is a direct impact from management productivity or lack thereof on the outcome of our status regardless of your opinion on these matters.

 

[Mr Red]

Hit it on the head INFORMER.The only thing left of the Company I hired into,
is the name.The rudderless ship continues its journey to the rocky shore !!

 

[WorldTraveler]

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.

that is true but there is no assurance that AE could find places to fly aircraft for other airlines even if it were permitted to to do so.
There is a glut of regional capacity in the indiustry and that trend will continue as additional hubs are closed. DEN is being downsized, CLE will be closed in a couple years....

 

[737823]

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.

But the unions of course celebrate this fact and even spin it is the traveling public is giving them a show of solidarity. This couldn't be further from the truth as the traveling public (myself included) book on other carriers because we don't want to stranded by the selfish "safety professionals".

Josh

 

[WorldTraveler]

of course the real reasons such as that AA is facing growing competition in its key markets is conveniently forgotten in these discussions because there is no way to blame labor.....

you need only look at the quarterly RASM data and see that DL and UA's larger position in Asian countries outside Japan is a big driver in AA's revenue underperformance. Further, AA has not expanded to Africa and the Middle East which are some of the fastest growing revenue regions

As much as people want to believe, AA mgmt's compensation has NO impact on AA's profitability. The ABILITY of management and the ability to work with labor surely is important, though.

 

[eolesen]

Arguing about management productivity and wages is pissing in the wind, and really just distracts from the bigger issues.

Management salaries/benefits came out to be about 2% of the total cost of running AMR last time I looked.

Bitching about 2% and ignoring the other 98% won't fix a damn thing.

 

[TWU informer]

Arguing about management productivity and wages is pissing in the wind, and really just distracts from the bigger issues.

Management salaries/benefits came out to be about 2% of the total cost of running AMR last time I looked.

Bitching about 2% and ignoring the other 98% won't fix a damn thing.

You are correct when looking at it strictly from a bean counter point of view, but there is another more important view that will impact the bottom line. Showing up to work everyday watching management baffons and co-workers that cannot do their jobs effectively, while at the same time working under concessions and watching negotiations stall because "cost need to remain in check" is difficult in itself. This corporation viewing things from a bean counter perspective and ignoring the human element to success is just as much part of the part of problem as anything else. Creative Accounting and complicated math are not the only ingredient of a succesful business model.

When you combine the request by the same management that allows this that we sacrifice personally further while on a daily basis they magnify their own wasted expense to the company, then it becomes more personal and angering. It is the management and the union leadership that allow the failing co-worker to continue without consequence. We cannot keep subsidizing this problem with pay and benefit concessions that do nothing more than demoralize those that are self motivated, capable, and self disciplined.

When it is management and lately the "union counterpart" that we see daily making bone-head decisions or no decisions at all, well we discuss these matters daily amongst ourselves on the lower rungs of the ladder so to speak. Then we see demands that we subsidize these failures, well at that point, your numbers and percentages no longer matter. Most employees compare themselves on an individual basis to their peers and their management. When their peers and management are allowed to waste or screwup daily without accountability, then each rightfully so can honestly conclude and imagine that their pay and benefits are NOT the problem.

How many times does this have to be pointed out? Each group able to point the finger at the other, while neither is held accountable for the failures. This is a cycle of doom, I dont care if you are running a landscape business or an airline. It just happens that the airline will last a little longer by shuffling and manipulating money like they are playing the shell game out on the street. In the end, this too will fail and even the corporation with billions in cash flow cannot keep playing the shell game without bringing experience and accountability to the lower rungs of the ladder. Stop asking us to fund ignorance and lack of accountability with our pay and benefits and you might get some sympathy. When we go to work daily and see every dollar we have already given up pissed away, then in essence we are not correcting the problem, we are instead funding and enabling the problem to flourish. Soon we could each work for free ourselves and yet the problem and failures remain part of the daily grind.

Place your percentages into accurate context.

75% lack of experience, ability, and accountability can no longer be swept under the rug by 25% of the self motivated, capable, and self disciplined workforce.

Try to find a bean counter that you think might actually understand the point I am trying to make. Give that bean counter a bonus and promote him/her to a top level postion. Give them some authority and the ears of the B.O.D.'s and you might actually make some headway here.

 

[Frank Szabo]

... snip
Try to find a bean counter that you think might actually understand the point I am trying to make. Give that bean counter a bonus and promote him/her to a top level postion. Give them some authority and the ears of the B.O.D.'s and you might actually make some headway here.

Figure a way to explain this in terms of GAAP as this is all they understand. Otherwise, while you've made a excellent point, you're pissing into the wind.

 

[eolesen]

No, Dave & Frank. I'm not looking at it from a bean counter point of view. The whole issue of management compensation etc. is primarily emotional, and even I've given up hope that the senior management team is going to change their wayward ways.

Worry about the stuff you can actually change. The rest is just a huge distraction and will only drive up your blood pressure or make you kick your dog...

 

[Bob Owens]

Sounds like an oxymoron, but whatever.

According to airlinefinancials.com, AA's 2009 management expense was $78 million. If they worked for free or they were all fired and not replaced, AMR would still have lost over $300 million.

Don't have 2010 numbers yet, but given AMR's stock price performance, I'd bet it will be about the same.

$78 million between how many people?

At $22 billion and 80,000 employees AMR generated $275,000 per worker. Which workers took out more than they brought in?

By the way thats a 75% increase over 2002. If management cant show a profit with a 75% increase then the problem is management, not Labor.

 

[FWAAA]

$78 million between how many people?

Don't know and don't care. As I said above, if they worked for free, AA would have still lost over $300 million in 2010. They aren't demanding raises, their bosses aren't demanding concessions and the TWU, APA and APFA don't get to negotiate management pay or workrules. Those three unions have proven rather inept at negotiating their own pay and workrules, right?

At $22 billion and 80,000 employees AMR generated $275,000 per worker. Which workers took out more than they brought in?

By the way thats a 75% increase over 2002. If management cant show a profit with a 75% increase then the problem is management, not Labor.

It's actually 84% more per mainline employee than in 2002. In 2002, AA mainline had $15.871 billion in revenue and had 97,800 mainline FTEs for an average of $162k per employee. In 2010, AA mainline had $19.843 billion in revenue with 66,500 FTEs for an average of $298k per emplolyee. That's 84% more revenue per mainline employee in 2010 compared to 2002.

Of course, you're choosing AA's worst year ever to begin your comparison, a year in which AA mainline reported a net loss of $3.5 billion. 2002's $162k per employee revenue was nowhere near enough to break even.

Fuel in 2002 cost AA mainline $2.5 billion. In 2010, fuel cost AA mainline $5.7 billion, or a $3.2 billion increase. And that was flying almost 300 fewer mainline planes than in 2002.

Finally, AA mainline employee wage expense. In 2002, AA mainline wage expense was $7.954 billion across 97,800 mainline employees. In 2010, AA mainline wages expense was $6.25 billion, or $1.7 billion less than in 2002. That means that per-employee, AA mainline wage expense was $81,000 per employee in 2002 and $94,000 in 2010.

How can that be? Per employee wage expense is $13,000 more in 2010 than it was in 2002? Some of the employees furloughed since 2002 were not at top of scale, increasing the average immediately after the furloughs. Additionally, some of the employees not furloughed (or quickly recalled) were recent hires and have had substantial step increases in the past eight years so that their income is substantially higher now. Flight attendants like jimntx - IIRC, he was hired not long before 2002 so his hourly pay is substantially higher now than it was in 2002. It's down quite a bit from his 2002 expectations of where his 2010 pay was headed before the concessions, but he's making a lot more per hour than he was back then. No doubt there are plenty of other examples.

Your pay has not followed along as you had already topped out in 2002, right?

Finally, who cares how much per-employee revenue has increased? It's irrelevant. You have long posted that revenue is the sole province of management, not labor, as management decides how much or how little to charge in fares. Well, then, the increase of per-employee revenue is not because of anything attributable to labor, right? You can't have it both ways - if falling revenues are not your concern (because it's a management failure), then increasing revenues are similarly not your concern (because higher revenues must be a management success), right?

Per-employee revenue has certainly increased dramatically from 2002. But per-employee fuel expense has far outpaced those increases. On top of that, per-employee wage expense has also increased.

I've said it before - it makes no sense that you make the same money in NYC fixing airplanes that need fixing in NYC as someone in Tulsa whose job can be performed anywhere in the world. I don't know how you will remedy that. The only thing of which I'm reasonably certain is that AA is not going to substantially increase its overhaul wage expense so that your pay can rise to where it ought to be. You have a lot of union brothers in a cheap cost of living location who have been riding your coattails for many years. It appears that they have as many or more votes than the line maintenance employees. Good luck solving that conundrum.

 

[Bob Owens]

Finally, AA mainline employee wage expense. In 2002, AA mainline wage expense was $7.954 billion across 97,800 mainline employees. In 2010, AA mainline wages expense was $6.25 billion, or $1.7 billion less than in 2002. That means that per-employee, AA mainline wage expense was $81,000 per employee in 2002 and $94,000 in 2010.

How can that be? Per employee wage expense is $13,000 more in 2010 than it was in 2002?

Two ways, and increased average costs are almost always the case when a company has layoffs but I'm sure you knew that. Obviously, even if your overall labor expense goes down, if you dont hire new employees your average costs per employee go up because as you pointed out you have people on steps, another factor was that the company gave Supervisors big raises through the "RISE" program. What they did was take the Supervisors and rename them managers, they did the same functions are before but now they got manager rates of pay instead of Supervisor rates of pay. Keep in mind that all of management is included in that figure. Their raises offset our savings, the also increased the ratio of managers per worker, further offsetting the savings. Obviously once the company starts hiring workers again the average cost will go down.

That said the cost went up $13000 but the revenue went up over $136,000(your numbers).Normally when companies shrink the challenge is that revenue falloff is larger than per unit expense increase. AA saw a huge revenue increase while shrinking the company, thats very favorable and uncommon.


The recall of TWA workers would also inflate the figure since those workers came in with full pay. We have a lot of guys at top pay with the full allottment of vaction, sick time etc that retired,this has the effect of lowering the amount of workers needed for coverage, this affects the total figure but not the average figure per worker because the max vaction would affect the number of workers needed but not the rate. This also helped increase the ratio of managers earning max rate to workers under concessions, thus inflating your figure for average cost per employee.

Finally, who cares how much per-employee revenue has increased? It's irrelevant. You have long posted that revenue is the sole province of management, not labor, as management decides how much or how little to charge in fares. Well, then, the increase of per-employee revenue is not because of anything attributable to labor, right? You can't have it both ways - if falling revenues are not your concern (because it's a management failure), then increasing revenues are similarly not your concern (because higher revenues must be a management success), right?

Wrong, I've said that profits are of no concern to workers because we dont control what they do with the revenue we produce. Increased revenues simply show that the company has seen a huge increase in productivity from us, and the promise of Capitalism is that increased productivity is usually rewarded with increased living standards. We've seen the opposite. This promise was part of the sales pitch against the theory that Wages and Profits are inverse and the attempt to sell the theory that workers and capitals interests were complimentary rather than conflicting.

While we dont control the revenue either I cite this to counter the companys claims that we need to produce more just to keep what we have, the fact is we have already given the company a dramatic increase in productivity yet they are demanding further increases in productivity while offering nothing in return. Instead of being rewared for increased productivity we are being punished, continued behaviour and performace on our part will only result in continued behaviour and increased demands on their part. We've already earned our pay raises, its time to collect.

You dont like using the figure because it shows that the company has seen a vast improvement in productivity (which is very much relevant) and it doesnt support your arguement.

Per-employee revenue has certainly increased dramatically from 2002. But per-employee fuel expense has far outpaced those increases. On top of that, per-employee wage expense has also increased.

Ok, your claim, what is the per-employee fuel expense increase and what is the relevance? Should that ratio also apply against increased landing fees and other carrier costs or should it only be factored against labor?? What control does the employee have over fuel prices and arent employees also affected by higher fuel prices? Dont they in fact have to increase the price they charge for their labor to pay for increased energy costs as well as the company? What benifit does labor derive from increased fuel costs and why should it be a consideration of what labor should chanrge for what they provide?Doesnt the increased revenue of the smaller company prove that the company has already passed increased fuel costs on to the consumer through either higher fares and/or additional fees and more crowded planes?

Using your numbers, employee expenses are down $1.7 billion but fuel is up $3.2 billion, so the labor savings absorbed all but $1.5 billion of the increased fuel costs, where's the rest of it? AMR is bringing in over $4 billion more in revenue. Dont even attempt to bring up the $3 billion loss they claimed, $988 million of that was "Goodwill". We know that the revuenue is real and that losses are usually largely intangible, we call it cooking the books you call it legal business practices, we both know the numbers are bullshit when it comes to losses. Theres no way a company can lose real money(vs writedowns of intangible assetts, accellerated depreciation and all the other legal FASB approved ways our government gives corporations ways to avoid paying taxes) for as many years as airlines have and stay in business.

As far as the per employee cost increase perhaps the management raises were a mistake, and those costs should be extracted, the fact is that for mechanics their costs have gone down and the increase is an indicator of how much management costs have gone up, it not only absorbed all the savings from the union side but it brought the average up $13000, according to your figures. For the last seven years as headcount went down on the floor headcount in management was either maintained or increased. You may not care what management makes, or more likely dont want to hear it because it doesnt support your arguement but its most definately a relevent component in labor costs.

The "conumdrum" comment is nothing more than an attempt to cause division. I've already cited an example where AA saves a lot of money by doing work in house(painting) and the fact that AAs actions indicate that they save money by doing OH in house. They have brought more work back in house and they plan to add 900 more heads. They could in fact outsorce well over 1000 jobs and all of the work they are adding but they chose not to even though they know we will be demanding substantial raises. You have yet to produce any evidence that supports your claim that AA cant pay OH what SWA and other carriers pay their limited but still existing in house OH.

You conviently ducked the question of which employees took more from the company than was brought in on average per employee. That must be your legal training kicking in to duck and avoid a line of questioning that will inevitably lead to the exposure of something you dont want brought up.



The fact is the airline industry is a huge component of the oil industries market, if the airlines cant pay for the fuel the oil companies take a hit, they have an incentive not to overcharge still they have managed to sell the airlines a lot less fuel for a lot more money and post record profits during a recession that they caused. They will continue to raise the price of fuel as long as the airlines continue to pay it, the more concessions we give the more the airlines can continue to pay and the more the airlines will demand from us, the circle will just continue to go round and round until we stop it .

The fact is the Airports make a lot of money by charging the airlines to do business at their airports, if the airlines cant pay the fees and go out of business the airports lose money but despite all the losses and capacity reduction the airports have managed to charge more.

The same goes for the banks and other vendors, nevermind all those that count on the service we provide, they all have just as much interest in keeping the airlines going as workers, but workers are the only ones making less, despite your figures. If workers go on strike they all lose money and if we want to get our share of the additional revenue, before everyone else takes a bite, thats what we must be prepared to do. If we dont they will continue to charge more, the airlines will continue to post losses and continue to demand more from us.