What's new

Arpey- How We Do Things Differently

This is quickly going off topic, and frankly, there's nothing to say about AA's labor costs that hasn't already been discussed to death on other threads.
 
The company has a lot of potential and given its presence in LAX, MIA, NYC they are poised for success if they can get labor costs to come down.

Josh

This is what I was referring to! "poised for success IF they can get their labor costs down.".

I don't know why you think this is off topic.
Is that the ONLY way a company can be SUCCESSFUL? TO CONTINUALLY GET LABOR COSTS DOWN?

What about management's role in the game?
If Arpey is defending AA's strategy by avoiding BK and preserving employee pensions, are these two items not labor "cost" related.

This was a big issue in that article.
 
Why can't AA resolve matters in Tel Aviv and enter that lucrative market?
There are no matters for AA to resolve in Israel. AA never operated in that market and has no obligations there.

When AMR bid for select assets of TWA in bankruptcy court, it made it known that if it won it would stop flying between JFK and TLV for economic reasons (Dallas Business Journal). TWA had over a hundred employees in Israel servicing just one daily 767-300 round trip. Most other foreign airlines operating in Tel Aviv use contractors to handle their ground services. The route was a money loser for TWA. The Delaware bankruptcy court never put AMR on the hook for TWA's pension and severance obligations for its Israeli employees.

When TWA's TLV employees found out that AA was not picking up the route, they petitioned the Tel Aviv bankruptcy court to seize and liquidate TWA's assets in Israel. When the court granted that order, TWA suspended service to TLV indefinitely to prevent seizure of its aircraft (Reuters).
 
The only way a company will be successful is to be profitable. Being profitable means having money left over after paying *all* the bills. Labor is one component of that, pricing is another.

I'd love to talk about how to improve revenues, but I've said it a couple hundred times -- AA no longer controls pricing. They don't determine who will set the buyer's price in a given market. They also don't control fuel prices, nor do they determine where the economy is going to go.

Management has some ability to work within those boundaries, but can't control without union consent how much it pays its unionized employees, and how productive they're going to be.

And like it or not, the one line on the balance sheet where AA appears out of line (and disproportionately at that) with its competition is labor expenses.

I disagree with Josh that labor costs are the culprit. It's the workrules.

Productivity is where AA will win or lose things. I have no problem paying people for an honest day's work, but I do have issues with paying three people to do the job of two, or with maintaining full time employees when there's not eight hours worth of real work to be done. I also have problems with giving full benefits to part timers (including those who voluntarily become part time thru trip trading and CS)...

And following those lines of discussion will inevitably result in everyone falling into deeply entrenched defensive positions (just like you took) about how labor has already given their share and more...

Frankly, I'm a little tired of that debate.
 
The reason is because AA does not have the equipment to fly all those extra routes you mention. Loose a couple triples to OTS and someone in the system isnt getting to their destination. Arpey and Co took the money he sqeezed out of us and instead of buying widebodys, bought 73s, which we need. But squandared it on winglets and interiors on tired old 76s and 75s; countless terminal and Admiral club upgrades as well. And any other capitol improvement that has come down the pike.
Not to mention the 1.4 billion to keep JAL in one world.
 
The reason is because AA does not have the equipment to fly all those extra routes you mention. Loose a couple triples to OTS and someone in the system isnt getting to their destination. Arpey and Co took the money he sqeezed out of us and instead of buying widebodys, bought 73s, which we need. But squandared it on winglets and interiors on tired old 76s and 75s; countless terminal and Admiral club upgrades as well. And any other capitol improvement that has come down the pike.

I'm not a route planning expert, but it seems to me AA's 777/767 fleet is underutilized. For example-why is it that every time I'm at ORD/DFW/JFK I see multiple 777s lined up-unusued (not making money). As much as I like have a 763 on BOS-LAX, why can't that aircraft be used for a more lucrative international route? I'm just throwing out there that CO has significantly fewer widebodies-22 777s and 22 767 (unlike AA they are -200ER and -400ER) but has significantly more internationally configured 757s. Delta on the other hand, only has 16 777s (-200ER & -200LR) but more A330s, 747s, 767 and they both fly to a plethora of international destinations. The Delta 777 fleet is stretched incredibly thin yet they manage to fly to Dubai, Hong Kong, Shangahi, Tel Aviv, etc.

The problem is rather than sending 757s to secondary markets AA is sending them to places like Heathrow, Paris, Brussels, etc. The Continental 757s are being outfitted with the lie flat seats and offer entertainment systems in the back. Why didn't AA install them (let alone on the 767s)? I was on BOS-CDG earlier this summer and overheard people complaining about the tiny aircraft and said they took AA because it was $100 cheaper than Air France with a 777.

I'd hardly say AA squandered money on terminal improvements. When I lived in NYC, the old JFK terminal was awful. Now it's much, much better and gives AA a leg up compared to both DL and CO. DFW Terminal D is very nice as well and MIA has come along way too. Unless you are advocating AA invests the money in its employees (presumably you are) I think it was well spent.

The Admrials Clubs and Flagship lounges are very weak in my opinion. Im not expecting a British Airways Concorde Room or Cathay Pacific Pier lounge, but seriously the Laguardia Admirals club is a dump. The new Boston club is very nice but only adequate. AA really should provide complimentary wifi to all guests, free liquor/wine/beer (like all except UAL) and more substantial food offerings. The new Heathrow Flagship lounge is a welcomed improvement, but I still prefer the BA First class lounge which I have access to. I'm sorry employees don't like AA investing in premium products for their most lucrative customers.

The winglets will make the 763's more marketable on the secondhand market.

Equipment is part of the reason a lot of the secondary markets Josh pines away for aren't served, but don't overlook the fact they're already served by codeshare partners or aren't going to generate the type of traffic that AA's network can support. UA, CO and DL can make markets work from IAD, EWR, and JFK that will be loss leaders from any other hub. AA could try to be the third (or fourth) carrier at JFK serving the same markets as DL or CO, but again, it's a matter of where you can make money year round.

That speaks volumes about the problem-AA management lacks the vision and planning to enter markets that could be successful before they get saturated. I suppose they are fairly conservative but it also seems they don't send the proper equipment places. I remember the Chicago-Moscow route on 777s two summers ago why does that route need a 777 if it doesn't have sufficient premium traffic and awful loads? Perhaps to keep the non-revs happy?

I prefer non-stop service or convenient connections whenever possible. I'm sick of the Heathrow terminal changes and connecting in Newark is far more convenient.

There are no matters for AA to resolve in Israel. AA never operated in that market and has no obligations there.

When AMR bid for select assets of TWA in bankruptcy court, it made it known that if it won it would stop flying between JFK and TLV for economic reasons (Dallas Business Journal). TWA had over a hundred employees in Israel servicing just one daily 767-300 round trip. Most other foreign airlines operating in Tel Aviv use contractors to handle their ground services. The route was a money loser for TWA. The Delaware bankruptcy court never put AMR on the hook for TWA's pension and severance obligations for its Israeli employees.

When TWA's TLV employees found out that AA was not picking up the route, they petitioned the Tel Aviv bankruptcy court to seize and liquidate TWA's assets in Israel. When the court granted that order, TWA suspended service to TLV indefinitely to prevent seizure of its aircraft (Reuters).

Yes, but under Israeli severance law AA is being held accountable and the government has lien on AA. I'd support them using contractors like Continental does (frankly CO has better ground service-shorter lines, faster service in TLV than LY, except the King David Lounge is amazing compared to the awful Dan Lounge CO contracts). Again I don't know the operational specifics as I don't have any airline experience, but 100 employees for a 767 does seem excessive. I imagine if AA tried to pull something like this in the United States, the unions would be up in arms too. Again-in the United States AA has no problem complying with all of the laws, FAA regulations and in other countries as well. Their US based employees are well compensated and enjoy generous benefits.

But both as a Jew (Shana Tova!) and a dual Israeli citizen, I wholeheartedly disapprove of AA/TWAs handling of the situation. I'm not boycotting AA or petitioning their management, they really could have used this as an opportunity to grow in the Tel Aviv market. If I recall correctly, Delta started their JFK-TLV shortly after AA/TWA suspended theirs.

Josh
 
The only way a company will be successful is to be profitable. Being profitable means having money left over after paying *all* the bills. Labor is one component of that, pricing is another.

I'd love to talk about how to improve revenues, but I've said it a couple hundred times -- AA no longer controls pricing. They don't determine who will set the buyer's price in a given market. They also don't control fuel prices, nor do they determine where the economy is going to go.

Management has some ability to work within those boundaries, but can't control without union consent how much it pays its unionized employees, and how productive they're going to be.

And like it or not, the one line on the balance sheet where AA appears out of line (and disproportionately at that) with its competition is labor expenses.

I disagree with Josh that labor costs are the culprit. It's the workrules.

Productivity is where AA will win or lose things. I have no problem paying people for an honest day's work, but I do have issues with paying three people to do the job of two, or with maintaining full time employees when there's not eight hours worth of real work to be done. I also have problems with giving full benefits to part timers (including those who voluntarily become part time thru trip trading and CS)...

And following those lines of discussion will inevitably result in everyone falling into deeply entrenched defensive positions (just like you took) about how labor has already given their share and more...

Frankly, I'm a little tired of that debate.
Two problems with your post.
1, The planes are full, passengers really dont have much choice. Either pay or stay home and the airlines have not only been steadily raising prices but they are hitting people up with all sorts of fees, a fee is really nothing more than a price increase.

2. Everybody else has been getting more, as we gave up wages other parties simply raised their prices, thats how they ate up the savings and the additional revenue, if we wait to be the last ones served there will never be anything left for us. This has been an unprofitable industry for 75 years, why should we think that all of a sudden it has to become profitable? Even with the wages, obviously some have not taken a cut, the average wage at AMR has increased by over $10,000 since we took the cuts and its not going to any of the unionized groups.
 
Good point. As for the 767 winglets, there was an article a week or two ago where AA says the 787 will replace the 767s. Yes, that will be 2013, but I am curious if the cost of doing the 767s is worth the fuel savings until each one is retired.
I truly do not have any statistics on this, it may or may not have been worth it.
Maybe someone has some data.
Cash burn, cash burn, dont dare show profits with all your union folks in mediation!

More marketable??!! Please, why spend that kind of money on something you're going to seel. Heard a little story about those winglets as well, seems AA was paying a huge markup compared to other contractors for the same parts, burn that cash!
 
I hate people that hide behind their religion!! But even they get what they deserve eventually!! Christians do not steal from others let alone tens of thousands of others like the EhEh CEO's did!!! God has a special place for people like these. Some of them will pay in this life and the others will pay in the after life! I am thankful for wonderful faithful wife who would never cheat on her marriage unlike some of our CEO's wives.
I do not work on paper airplanes.................. 🙄 🙄 🙄 🙄 🙄 🙄 🙄
 
, the average wage at AMR has increased by over $10,000 since we took the cuts and its not going to any of the unionized groups.

Your number and excuse are both a little suspect, Bob. Unless each member of management got an average of a $121,000 raise over the past seven years, which is probably not close to being realistic even in your world.

I suspect the average wage increased mostly because of all the junior people who got laid off in just about every workgroup...


Jetmechjer, which airline CEO (or their spouse) has been having an affair lately? Do tell....
 
Your number and excuse are both a little suspect, Bob. Unless each member of management got an average of a $121,000 raise over the past seven years, which is probably not close to being realistic even in your world.

I suspect the average wage increased mostly because of all the junior people who got laid off in just about every workgroup...


Jetmechjer, which airline CEO (or their spouse) has been having an affair lately? Do tell....


Supposedly, Our-Pay. Although, not that recent, if true.
 
Supposedly, Our-Pay. Although, not that recent, if true.

Ah, that. I thought it was referring to someone at US.

Yeah, doubt there's a whole lot of truth to paper airplanes, otherwise it would have been discussed here... At the time, some folks who supposedly knew the author said the book was based about his wife having cheated with one of his friends.
 
http://www.thestreet.com/story/10852291/2/american-airlines-ceo-how-we-do-things-differently.html


Wow! What can I say to this? Well, I'll give it a shot.


So, our illustrious CEO has a strong ethical sense? He also has a "commitment to principle"? His "faith has been the overarching anchor of my soul, from which a reservoir of fortitude has sprung"?

Whew, wait a second while I wipe a tear away from my burdened eyes. Okay, I'm better now. What exactly does Mr. Arpey mean by "ethical sense"? Do the words lie and steal reside in his meaning? Because from my personal experience his sense of ethics certainly include these words. How can he cry to his employees that there will be a "shAAred sAAcrifice" from everyone at AA in order to stay away from the bankruptcy monster but in reality not everyone had the joy of burdening this sacrifice? This was a flat out lie. He then went on and stole from the employees because his accepting million dollar bounuses, along with the rest of the Chosen, was stealing from the employees.

His commitment to principles falls hollow on my ears because a person needs to possess principles in order to preach them. Now it might just be me but "principles" to me means that a person does what is right all the time. Principles do not mean you lie and steal to benefit any group. A simple test to ask yourself is if you owned a bussiness and told your employees they had to take life changing cuts in pay and benefits in order to keep their jobs and then you flagrantly took a pay raise in the form of bonuses, would you have principles? I don't think so.

As for his "overarching anchor" that is the bank account he possesses own our blood and sweat.

I particularly like how AA is $600.00 million behind the 8 ball compared to other airlines. Wait a second! We gave up BILLIONS in concessions 7 years ago yet we are still behind? The concessions were to last only 5 years yet Mr. Arpey has dragged his feet for an extra two years, with all work groups at AA, yet we are behind!

I would like to suggest that Mr. Reed look back at AA's history and really see "How We Do Things Differently" at AA. I am positive C.R. Smith would take a switch to young Mr. Arpey's well padded behind and Mr. Crandall would simply grab Gerard by the ear and teach him a lesson in how to make an airline number one. And lesson number one is you don't lie or steal from your employees.

Ken MacTiernan
Certificated A&P, I.A.
 
And following those lines of discussion will inevitably result in everyone falling into deeply entrenched defensive positions (just like you took) about how labor has already given their share and more...

Frankly, I'm a little tired of that debate.

Frankly, I am tired of giving concessions. Airlines have been taking back for 30 years and still can't be profitable consistently. We have to subsidize low pricing, high fuel and every other economic downturn imaginable.

Start shrinking to profitability. or deal forever with the lowest morale possible.
 
Good point. As for the 767 winglets, there was an article a week or two ago where AA says the 787 will replace the 767s. Yes, that will be 2013, but I am curious if the cost of doing the 767s is worth the fuel savings until each one is retired.
I truly do not have any statistics on this, it may or may not have been worth it.
Maybe someone has some data.

Excellent question. The first firm 787-9 delivery (of the 42) has been delayed until 2014 and the last in 2018, or roughly one per month. The 58 options are scheduled for delivery between 2016-2021. From the second quarter 10-Q:

In July 2010, the Company and Boeing agreed upon a revised delivery schedule due to the impact of the overall Boeing 787 program delay on American’s delivery positions. The first aircraft is currently scheduled to be delivered in 2014, and the last firm aircraft is scheduled to be delivered in 2018 with deliveries of additional aircraft, if any, scheduled between 2016 and 2021.

The first 767s to be retired will be the 762s; after that, dunno how fast the 763s will be parked once the 787s finally arrive.

As to the cost v benefit of the 763 winglets, the winglets are expected to save "upwards" of half a million gallons of fuel each year per 763 or about $1 million of fuel annually at today's prices:

The winglets help increase the plane’s lift without increasing engine power--a combination that improves overall fuel efficiency. Fort Worth-based American predicts the feature has the potential to save the company upwards of 500,000 gallons of fuel per fitted aircraft.

http://www.bizjournals.com/dallas/stories/2009/03/09/daily8.html

Most of today's AA 763s will still be flying at AA well into the later part of this decade even if the current 787 delivery schedule holds up - so AA will get several years of fuel savings in exchange for the investment, which is about $2 million per plane:

In Kansas City, Mo., mechanics at American Airlines are making an extensive after-market change to many planes in their fleet by installing 11-foot vertical panels called winglets on the wingtips of 58 long-range Boeing 767’s. The winglets reduce drag and increase the amount of weight the plane can carry by 12,000 pounds, increasing the profit-making potential of those flights.

Other airlines are adding winglets to their airplanes for a fuel savings that can be as much as half a million gallons per plane a year, said Patrick LaMoria, vice president of sales and marketing at Aviation Partners Boeing, in Seattle, the designer of the winglets. Winglets for the 767 can take a month to install and cost nearly $2 million per plane, he said.

http://www.nytimes.com/2009/04/30/business/energy-environment/30aviation.html?_r=1

Looks to me like it's a safe gamble that the fuel savings will more than pay back the $2 million, since that's just two years worth of fuel savings at today's jetA price. Of course, if fuel prices climb higher, that just speeds the payback period. On the flipside, if fuel prices crash, then the billions of dollars AA would save from lower fuel prices will enable AA to pay you guys whatever you want and the $116 million "wasted" on the winglets would be pocket change. And odds are that fuel prices don't permanently collapse between now and 2018 or 2021 or beyond.

Not that Delta's decisions validate Arpey's (and AA's) decisions, but Delta has ordered at least 30 sets of winglets for its 763s. So have LAN, ANA, HA and other 763 operators. Even if Arpey is prone to throw away money on frivolous fuel-savings fantasies, doubtful he could get competitors to follow suit.

Some have opined that AA will fly 763s on more of the former AB6 Caribbean routes once the 787s begin to arrive (notably, MAH4546 has posited this view). Since the retirement of the last AB6, AA has moved some 763s to former AB6 routes. If AA continues to do so once the 787s arrive, it might be quite a while before the last AA 763 is parked. Might was well save a million dollars (or more) worth of fuel per year per plane doing so. The likely higher resale value and lower carbon emissions are just gravy.
 

Latest posts

Back
Top