Analyst Jamie Baker says AA won't cut labor costs as much as Horton would like

[FWAAA]

Near the end of a Bloomberg article today, Jamie Baker predicts that AA will trim labor and pension expenses by $500 million a year, less than the company targets:

J.P. Morgan analyst Jamie Baker estimated that AMR will use bankruptcy protection to shrink 10 percent and cut labor and pension costs by $500 million a year, less than the company is targeting. He said AMR will emerge financially “much improved,” but not superior to bigger rivals United and Delta.

http://www.washingtonpost.com/business/industries/new-ceo-of-american-airlines-parent-amr-says-company-will-cut-jobs-in-bankruptcy/2011/12/15/gIQAalA7vO_story.html

If the company shrinks by 10%, that should equal a labor expense cut of $700 million all on its own. Given the very real likelihood that AA gets some productivity/scope/workrule changes, look for another $1 billion or more of labor savings.

My prediction: AMR's 2013 labor expenses are about $2 billion less than in 2011.

 

[WorldTraveler]

Near the end of a Bloomberg article today, Jamie Baker predicts that AA will trim labor and pension expenses by $500 million a year, less than the company targets:



http://www.washingtonpost.com/business/industries/new-ceo-of-american-airlines-parent-amr-says-company-will-cut-jobs-in-bankruptcy/2011/12/15/gIQAalA7vO_story.html

If the company shrinks by 10%, that should equal a labor expense cut of $700 million all on its own. Given the very real likelihood that AA gets some productivity/scope/workrule changes, look for another $1 billion or more of labor savings.

My prediction: AMR's 2013 labor expenses are about $2 billion less than in 2011.

He also says that AA will not bring labor costs in line with DL and UA... if that is the case, then AA needs to be relegated to the scrap heap... if they can't get competitive with their largest peers in one way or the other, it's all over... and it doesn't need to all be from labor costs.
I'm too tired to look it up but aren't AA's labor costs on the order of $6-7B/yr? If so, $2B is a 33% cut... a tad excessive from anyone's perspective.
Remember, AA is also chasing revenue declines.... the competitive situation in AA's top markets continues to heat up.

 

[FWAAA]

My estimate of AMR's 2011 labor expense is $7.1 billion, so a $2 billion reduction equals 28%. I suspect that at least half of that will be due to productivity/scope/workrule changes, enabling substantial headcount reductions.

 

[787nightmare]

He also says that AA will not bring labor costs in line with DL and UA... if that is the case, then AA needs to be relegated to the scrap heap... if they can't get competitive with their largest peers in one way or the other, it's all over... and it doesn't need to all be from labor costs.
I'm too tired to look it up but aren't AA's labor costs on the order of $6-7B/yr? If so, $2B is a 33% cut... a tad excessive from anyone's perspective.
Remember, AA is also chasing revenue declines.... the competitive situation in AA's top markets continues to heat up.

Agree...and they'll sure enough end up in the arms of Parker.

 

[Frank Szabo]

My estimate of AMR's 2011 labor expense is $7.1 billion, so a $2 billion reduction equals 28%. I suspect that at least half of that will be due to productivity/scope/workrule changes, enabling substantial headcount reductions.

When the S80s begin to bite the dust, the TULE base will thin out considerably personnel-wise, unfortunately. That aircraft had a good run but we ARE one of the few who operate them anymore.

AA's "management" seemed to torpedo all attempts at successful implementation of any third-party work, even Allegiant - they were pleased with the product and even offered to pay more but AA wouldn't't have it. Yesterday, my shop sent two men to OKC (AAR) to bore and rebush the MLG actuator mount as AAR had no tool to do the job.

Hard to tell what Centrepork is thinking - if one wants to use a liberal definition of the word.

 

[Buck]

When the S80s begin to bite the dust, the TULE base will thin out considerably personnel-wise, unfortunately. That aircraft had a good run but we ARE one of the few who operate them anymore.

AA's "management" seemed to torpedo all attempts at successful implementation of any third-party work, even Allegiant - they were pleased with the product and even offered to pay more but AA wouldn't't have it. Yesterday, my shop sent two men to OKC (AAR) to bore and rebush the MLG actuator mount as AAR had no tool to do the job.

Hard to tell what Centrepork is thinking - if one wants to use a liberal definition of the word.

As the MD80 OH work is reduced, there will also be some adjustments to the maintenance bases. As an example, some of the work at AFW could find its way to TUL DWH, of course it could work in reverse. But it is clear that Mr. Horton is going to put the company on a revenue generating footing.

 

[Bob Owens]

Well you can play whatever games you like with your numbers but let me tell you something, we aint coming out of this with anything less than what UAL settles for, we would rather shut the place down first. We know that either way planes will still be flying out of these airports as fast as they can fill them no matter what color the tail is and who ever ends up with the slots, gates and planes, they will need mechanics.



A little excerpt from AMT magazine

Delta Air Lines has outsourced airframe heavy maintenance and interior modification work to MRO companies overseas, but the Carrier has found that the cost savings are getting harder to come by, and there is a lot of time and effort involved in managing relationships with MRO suppliers. "There is a perception in the West that one can save millions by outsourcing heavy maintenance work to MRO firms in Aisia or Central America, but after getting the results from the requests for proposals, you are hit with a reality check and realize the savings are not as high as earlier thought" Delta TechOps Managing Director Harry Chowbey told the IATA Maintenance Cost Conference in Singapore.

AA will see costs decline because guys will continue to leave faster than they come in, however for the last eight years guys who left were replaced by recalls and upgrades who were already up the scale, not new hires so they really did not see costs decline. Those lists, recall and upgrades, have pretty much been exhausted, now they will be hiring more new guys. The fact that mechanics will be leaving faster than they come in will not be a problem for now because as new planes come in they wont need as many mechanics, nor as many repairs, I agree that the bases will see their headcount fall considerably due to less work, not high costs or outsourcing and that will generate even more savings but the line will likely see headcounts reduced as well for the same reasons. So AA will have a cost advantage over competitors who still have large numbers of recalls out on the street. AA will be hiring new workers while competitors are recalling workers who are up the scale. While AA's total labor costs may remain considerably higher their average costs will be lower and their "labor cost disadvantage" will dissapear once outsourcing and other costs are added in.

 

[Bob Owens]

As the MD80 OH work is reduced, there will also be some adjustments to the maintenance bases. As an example, some of the work at AFW could find its way to TUL DWH, of course it could work in reverse. But it is clear that Mr. Horton is going to put the company on a revenue generating footing.

With fuel at premium prices and pilots in short supply DWH expansion seems to make sense. Why tie up both sending a plane for a heavy check if you can fly it in on a money making trip and have it towed by a couple of mechanics to the Hangar? I think they got DWH for a reason, and there's plenty of room over there to build whatever they want.

 

[Birdman]

Why tie up both sending a plane for a heavy check if you can fly it in on a money making trip and have it towed by a couple of mechanics to the Hangar? I think they got DWH for a reason, and there's plenty of room over there to build whatever they want.

Most if not all of the special visits, light, and heavy checks come into and leave Tulsa on revenue flights.

 

[wrencher]

With fuel at premium prices and pilots in short supply DWH expansion seems to make sense. Why tie up both sending a plane for a heavy check if you can fly it in on a money making trip and have it towed by a couple of mechanics to the Hangar? I think they got DWH for a reason, and there's plenty of room over there to build whatever they want.

Money is no object to these folks Bob I know they where paying less for MCI and the planes were comeing in on revenue flights and people like you were spatting off about the cost of fairy flights and such, now we are closed and the people displaced all over the system haveing to commute and take a pay cut for by the way we are at the bottom of the seniority thing so and haveing to listen to this same shi$$$$ how much are they paying for DWH vs MCI ??? Really don't care you don't have to answer it's over heard Delta wants the DWH hanger back have you heard anything? When is the TWU going to work for it's members vs looking at it from the companies percpective?? Did you or the TWU get the cost saveings associated with the closeing of MCIE? Youv'e never anwered me.

 

[FWAAA]

Well you can play whatever games you like with your numbers but let me tell you something, we aint coming out of this with anything less than what UAL settles for, we would rather shut the place down first. We know that either way planes will still be flying out of these airports as fast as they can fill them no matter what color the tail is and who ever ends up with the slots, gates and planes, they will need mechanics.

I don't doubt that you will fight to get a payraise in bankruptcy, but I see contract abrogation in your future, and I predict that there are sufficient workers, including mechanics, at AA that the airline won't shut down. Some individuals may choose to leave, but many will stay.

I don't doubt that DL isn't seeing the savings it expected. After all, it's a nonunion shop and can change work rules and pay at its option, limited only by the willingness of its mechanics to work for Delta-dictated terms. Rather telling that the company that enjoys the greatest flexibility with its maintenance workforce is not as pleased with its outsourcing.

AA will see costs decline because guys will continue to leave faster than they come in, however for the last eight years guys who left were replaced by recalls and upgrades who were already up the scale, not new hires so they really did not see costs decline. Those lists, recall and upgrades, have pretty much been exhausted, now they will be hiring more new guys. The fact that mechanics will be leaving faster than they come in will not be a problem for now because as new planes come in they wont need as many mechanics, nor as many repairs, I agree that the bases will see their headcount fall considerably due to less work, not high costs or outsourcing and that will generate even more savings but the line will likely see headcounts reduced as well for the same reasons. So AA will have a cost advantage over competitors who still have large numbers of recalls out on the street. AA will be hiring new workers while competitors are recalling workers who are up the scale. While AA's total labor costs may remain considerably higher their average costs will be lower and their "labor cost disadvantage" will dissapear once outsourcing and other costs are added in.

I don't think AA will exit bankruptcy with its total labor costs "considerably higher" than DL or UA, but it looks like you agree with Jamie Baker. Now that retro is not going to happen, all those guys who were waiting around to collect it will no doubt leave, right?

 

[damajagua]

Bob Owens

"Well you can play whatever games you like with your numbers but let me tell you something, we aint coming out of this with anything less than what UAL settles for, we would rather shut the place down first. We know that either way planes will still be flying out of these airports as fast as they can fill them no matter what color the tail is and who ever ends up with the slots, gates and planes, they will need mechanics."


Now seriously do you think that a judge is going to let you shut the place down.
Come on already; please stop misleading the membership.
I expect that APFA, APA and TWU will not be able to get crap
for any of us. I wish the unions would be more honest with us
and not give us a sense of false expectations.
AA will get almost everything AA wants or a judge will shove
it down our throats. That is the reality my friend.
Just asked anyone that went thru this process.

 

[Mr Red]

Bob Owens

"Well you can play whatever games you like with your numbers but let me tell you something, we aint coming out of this with anything less than what UAL settles for, we would rather shut the place down first. We know that either way planes will still be flying out of these airports as fast as they can fill them no matter what color the tail is and who ever ends up with the slots, gates and planes, they will need mechanics."


Now seriously do you think that a judge is going to let you shut the place down.
Come on already; please stop misleading the membership.
I expect that APFA, APA and TWU will not be able to get crap
for any of us. I wish the unions would be more honest with us
and not give us a sense of false expectations.
AA will get almost everything AA wants or a judge will shove
it down our throats. That is the reality my friend.
Just asked anyone that went thru this process.

This is B/K number 2 and we are the bottom feeders of the Industry already.The good mechanics at AA will have another job tomorrow if need be.
I'm pretty sure their getting bottom of the industry pay output now to

 

[Buck]

WOW! it appears that the ex -TWAer's hate AA and it's mechanics. After being allowed by the TWU to work for AA, they should be just a little grateful and not wish what they have already experienced fall on another.

 

[eolesen]

Well you can play whatever games you like with your numbers but let me tell you something, we aint coming out of this with anything less than what UAL settles for, we would rather shut the place down first. We know that either way planes will still be flying out of these airports as fast as they can fill them no matter what color the tail is and who ever ends up with the slots, gates and planes, they will need mechanics.

Are you still under the impression you have any leverage left?...

You have one tool left in the box with which to "shut the place down", Bob.

Separation, be it retirement or resignation. Quit. Gamble on the claim there's a shortage. You always say you can find other gainful work making more than AA pays (which entirely begs the question of why you stick around)...

You can also try to slow down, but i suspect you'll have an injunction even faster, since there is always a way to get someone's attention while in Ch.11...

That's it, until the revised terms, be it imposed or consensual, come up for renewal. Trying to pretend you have anymore control over the situation is just delusions. And don't say we didn't warn you about the downsides of bankruptcy while you were thumping your chest about how much better you'd have been in 2003....