AMR profit predicted

[BoeingBoy]

So they want the information kept private for competitive reasons, but WE are supposed to believe their "labor cost disadvantage" chant simply from their word?

I have pointed out the public sources of info before - maintenance, pilot, FA cost, etc. If you want detailed contract specs for specific items you're probably out of luck, but the "bird's eye" view is available.

Jim

 

[PhatSappy]

Silk pockets and a new hat for the board of directors - at TWU of course.

 

[wcs]

Bob, how do you figure this isn't a disadvantage to AA? Here's some simple math to illustrate the point. Numbers are made up for the example's sake:

American Airlines
Income = $100, minus fuel at $35 and labor costs at $50.

Delta Air Lines
Income = $100, minus fuel at $35 and labor costs at $40.

AA's profit = $15, Delta's = $25.

So tell me how AA isn't at a disadvantage here?

What Mr. Owens is trying to say (Please correct me if I'm wrong) is that your formula is incomplete.
With the majority of Overhaul going outside the company there is an additional cost that must be added to
the Delta equation but not American. Overhaul is included in the AA equation but DL must now pay additional to
maintain their fleet. They pay more to move the aircraft to facilities outside the U.S. and pay companies to have their employees do the work. It's not a labor cost but is accounted for elsewhere in the balance sheet.
Additionally American obtains an advantage on the income side by maintaining Overhau in-house. The aircraft are moved through the process faster than if AA used an outside agency. That permits the aircraft to be more productive and therefor produce more revenue.
AA has a distinct albeit cloaked advantage here.

 

[eolesen]

What Mr. Owens is trying to say (Please correct me if I'm wrong) is that your formula is incomplete.

FFCA's formula may be incomplete, but the profitability numbers for AMR vs DAL don't lie. They're making money, and AA is at a disadvantage.

 

[Bob Owens]

FFCA's formula may be incomplete, but the profitability numbers for AMR vs DAL don't lie. They're making money, and AA is at a disadvantage.

Prove that the cause is labor.

For you and FCAA heres a little more detail. Hope its not too complicated for ya,

American Airlines
Income = $100, minus fuel at $35 and labor costs at $50.

Delta Air Lines
Income = $100, minus fuel at $35 and labor costs at $40 and vendor costs at $20.

AA's profit = $15, Delta's = $5.

American Airlines
Income = $100, minus fuel at $35 and labor costs at $50 and another $20 for new terminals and aircraft.


AA Loss=$5

 

[Bob Owens]

If it didn't "save money," then why is it that WN, UA, CO, DL, US and every other airline outsource much of their maintenance, especially heavy airframe overhaul?

Because they have to buy the weed wackers mowers etc and convince the wife to pop out a kid to do it. Jet Blue just raised their Northeast mechs up to $38/hr and AA eliminated the experience requirement for line maintenance. While the FAs may be coming back the mechs are still leaving. Its still just a trickle , but its an unprecidented trickle and as the economy recovers it will be an exodus. If you can read a schematic on an airplane you can read it on anything. The airlines arent the only ones facing at a lack skilled workers. Once depletetd it cant be reversed immediately because it takes time to create a mechanic.

 

[Bob Owens]

What Mr. Owens is trying to say (Please correct me if I'm wrong) is that your formula is incomplete.
With the majority of Overhaul going outside the company there is an additional cost that must be added to
the Delta equation but not American. Overhaul is included in the AA equation but DL must now pay additional to
maintain their fleet. They pay more to move the aircraft to facilities outside the U.S. and pay companies to have their employees do the work. It's not a labor cost but is accounted for elsewhere in the balance sheet.
Additionally American obtains an advantage on the income side by maintaining Overhau in-house. The aircraft are moved through the process faster than if AA used an outside agency. That permits the aircraft to be more productive and therefor produce more revenue.
AA has a distinct albeit cloaked advantage here.

Thanks WCS, you see exactly what I've been saying as the AA pundits try and baffle everyone with BS.

 

[eolesen]

Prove that the cause is labor.

For you and FCAA heres a little more detail. Hope its not too complicated for ya,

American Airlines
Income = $100, minus fuel at $35 and labor costs at $50.

Delta Air Lines
Income = $100, minus fuel at $35 and labor costs at $40 and vendor costs at $20.

AA's profit = $15, Delta's = $5.

American Airlines
Income = $100, minus fuel at $35 and labor costs at $50 and another $20 for new terminals and aircraft.


AA Loss=$5

Bob, can you prove that labor isn't the cause?

Virtually all non-labor costs for an airline are about the same -- fuel, terminal rent, aircraft financing, peanuts, soda.

The only real expense variables are salaries and benefits, and the corresponding expense lines where functions are outsourced.

 

[Bob Owens]

Bob, can you prove that labor isn't the cause?

I dont have to. I have proven that our wages are lower than many of our competitors and I've proven that we do more work in house and that the company chooses to do more work in house than they are contractually obligated to.

Virtually all non-labor costs for an airline are about the same -- fuel, terminal rent, aircraft financing, peanuts, soda.

I suppose thats why they need to keep it secret for competitive reasons.

We keep hearing this figure of $600 million but nobody is saying how they came up with that figure. Are our labor costs $600 million higher than Delta/NWA? Their costs will probably be around $6.8 billion. Not Higher than United/CAL which will be around $6.7Billion while AMR is $6.2. Thats the big three. So in reality AA/TWA pays around $500 million less than UAL/CAL and $600million less than DAL/NWA and they do the most work in house of the big three.

 

[Bob Owens]

Bob, can you prove that labor isn't the cause?

Virtually all non-labor costs for an airline are about the same -- fuel, terminal rent, aircraft financing, peanuts, soda.

The only real expense variables are salaries and benefits, and the corresponding expense lines where functions are outsourced.

Statements like this make me laugh. For years we've heard that "with the exception of labor, airline costs are fixed". Yet when you call them on something, showing that they have plenty to spend, like the fact that Boeing says they charge $80 million for a 737 the managment folks come back with "they pay less than half that" and "they wont release that information for competativeness reasons". (I'm sure if we were debating over the debt and I was saying it was overstated those planes would be right back up to $80 million and they would cite the same website I used)Then you have fuel hedging, which varies the price carriers pay for fuel, another "variable". Then we read about the deal JET Blue got at JFK, Rent, another , "Variable'. Airline Financing, one of the benifits of not going BK is that we get cheaper financing, just ask anyone you know who filed BK about their rates, so thats variable as well (thats probably one of the most variable). So in other words really nothing is fixed and the price of what they pay for pretty much everything is variable and subject to negotiations just like our wages. If the prices were "fixed" then there would be no disadvantge incurred by releasing all the exact figures of what all these fixed cost things cost!

 

[FWAAA]

I dont have to. I have proven that our wages are lower than many of our competitors and I've proven that we do more work in house and that the company chooses to do more work in house than they are contractually obligated to.

I suppose thats why they need to keep it secret for competitive reasons.

We keep hearing this figure of $600 million but nobody is saying how they came up with that figure. Are our labor costs $600 million higher than Delta/NWA? Their costs will probably be around $6.8 billion. Not Higher than United/CAL which will be around $6.7Billion while AMR is $6.2. Thats the big three. So in reality AA/TWA pays around $500 million less than UAL/CAL and $600million less than DAL/NWA and they do the most work in house of the big three.

Your posts appear to mistakenly assume that Brundage's $600 million cost disadvantage brick consists solely of maintenance costs. Brundage was talking about all AA's aggregate labor costs, which include some not-so-productive pilots and FAs, both of which fly less than pilots and FAs at the other legacy airlines. AA's pilots enjoy pay rates substantially higher than at UA/CO and AA's FAs, despite their assertions, are some of the most expensive in the industry (save, perhaps, for WN).

Delta/NWA have many more planes, pilots, FAs and fly many more ASMs than AA, yet its labor costs are only slightly higher. Same thing at UA/CO which is substantially larger than AA.

Yes, AA performs more maintenance in-house than the others. How much of AA's labor line item is attributable to TUL and AFW? Brundage didn't say that AA faces a $600 million brick due to its maintenance expenses - you're the one tearing down that strawman. AA's maintenance expenses may very well be inline with the others because AA's line mechanics make so much less than at WN and some other airlines.

Subtract an estimate for AA's overhaul operations' expenses from AA's wages, salaries and benefits total and then divide what's left by AA's ASMs. The result is still more labor cost per ASM than at the other airlines.

AMR's total labor expenses this year will total about $6.9 billion (not $6.2 billion), but that includes Eagle employees at their much lower wages. AA's mainline wages will total about $6.3 billion. Of course, UA/CO doesn't own any regionals so regional pay will be reflected in their contracted services. DL/NW owns a lot less regional capacity than in the past, so some of their regional wages show up in wages and some shows up in contracted services.

 

[Bob Owens]

Your posts appear to mistakenly assume that Brundage's $600 million cost disadvantage brick consists solely of maintenance costs. Brundage was talking about all AA's aggregate labor costs, which include some not-so-productive pilots and FAs, both of which fly less than pilots and FAs at the other legacy airlines. AA's pilots enjoy pay rates substantially higher than at UA/CO and AA's FAs, despite their assertions, are some of the most expensive in the industry (save, perhaps, for WN).

You are assuming for me. I never said that Brundage claimed that we made up the $600 although I have shown how in house maintenence produces numbers that managment can spin.
I'll let the Pilots and FAs speak for themsleves but I do recall that AA chooses to staff some of its International flights with more attendants than competitors, not contractual, company discretion. I suspect the same goes for the pilots. The question is does their contracts drive your claimed loss of productivity or do AA business practices? Do AA flight crew members have rules that arent in line with the rest of the industry?

Subtract an estimate for AA's overhaul operations' expenses from AA's wages, salaries and benefits total and then divide what's left by AA's ASMs. The result is still more labor cost per ASM than at the other airlines.

Ok what are they? How do the RASMs compare?

AMR's total labor expenses this year will total about $6.9 billion (not $6.2 billion), but that includes Eagle employees at their much lower wages. AA's mainline wages will total about $6.3 billion. Of course, UA/CO doesn't own any regionals so regional pay will be reflected in their contracted services. DL/NW owns a lot less regional capacity than in the past, so some of their regional wages show up in wages and some shows up in contracted services.

Actually those are 2009s numbers, we havent had a raise and we have around 450 less mechanics now than we did last year so our costs(M&R) are lower.

 

[FWAAA]

You are assuming for me. I never said that Brundage claimed that we made up the $600 although I have shown how in house maintenence produces numbers that managment can spin.
I'll let the Pilots and FAs speak for themsleves but I do recall that AA chooses to staff some of its International flights with more attendants than competitors, not contractual, company discretion. I suspect the same goes for the pilots. The question is does their contracts drive your claimed loss of productivity or do AA business practices? Do AA flight crew members have rules that arent in line with the rest of the industry?

Pursuant to their contract, AA pilots fly fewer hours per month, on average, than pilots at any other legacy airline. Their payrates are higher than most, but DL pilots are quickly catching up.

Similarly, the FA contract provides the lowest maximum scheduled hours of any legacy airline, substantially fewer than at DL/NW, UA/CO or WN.

Yes, the FA's own expert claimed that 3-class international service offered by AA is more expensive than the two class international service offered by some competitors. He doesn't explain how UA, which offers much more 3-class international service than does AA, has lower FA costs than AA. The APFA's outside expert did admit that AA's FAs are the most expensive in the industry when measured by ASM.

Perhaps an extra FA on AA's long-haul 777s compared to DL adds a small margin to AA's costs, but that doesn't change the fact that DL/NW is permitted to schedule its FAs for up to 100 hours a month while AA is limited to 77 dom/82 int. That causes AA to employ more FAs than if it had DL's flexibility.

 

[Bob Owens]

Pursuant to their contract, AA pilots fly fewer hours per month, on average, than pilots at any other legacy airline. Their payrates are higher than most, but DL pilots are quickly catching up.

"On average", once again is it because of the way AA does business or is it because they have unique langauge that other carriers dont have and what does that language say. I have a copy of their contract if you need it.

Similarly, the FA contract provides the lowest maximum scheduled hours of any legacy airline, substantially fewer than at DL/NW, UA/CO or WN.

Dont have a copy but could you be more specific.

Yes, the FA's own expert claimed that 3-class international service offered by AA is more expensive than the two class international service offered by some competitors. He doesn't explain how UA, which offers much more 3-class international service than does AA, has lower FA costs than AA. The APFA's outside expert did admit that AA's FAs are the most expensive in the industry when measured by ASM.

How do they compare as far as RASMs?

 

[wcs]

FFCA's formula may be incomplete, but the profitability numbers for AMR vs DAL don't lie. They're making money, and AA is at a disadvantage.

Who creates the disadvantage? Labor who sacrificed from the beginning thereby preserving shareholder equity or management that didn't take advantage of that gift?