chris perry
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Brundage now says labor is a brick in AA's backpack
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Frank Szabo
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In years past, a system-wide collection would have been taken up to purchase a load of bricks to be delivered to Bundage - unloaded onto his front yard ...
Ahh - the good old days.
World Traveller keeps spouting the same lies about productivity, leaving out the fact that he is comparing apples to oranges because AA has a different structure.
If company A produces 10 million in revenue has one employee that it pay $1million/year in compensation but pays out $11 million to vendors who provide the labor that produces that revenue then company A's productivity as measured by revenue per employee is $10 million.
If company "B" produces $10 million in revenue, does all its work in house and has 100 employees and pays then a total $5million ($50,000)in compensation then their productivity per that measure is only $100,000.
According to World Traveller the company A employee is 100 times more productive than company B employees despite the fact that company A spent $2 million more to produce the revenue than they actually generated once the vendor costs were added in while company B spent $7million less to produce the same revenue.
According to World Traveller company B has a severe productivity problem, their workers need to get their labor costs down to one million to be competitive! None of those other numbers matter, according to him.
When World Traveller looks at these companies he says that the fact that Company A pays $1million to its one employee doesnt mean anything because that one employee is so productive, according to his numbers, and he produces $10 million in revenue, company B on the other hand, according to World Traveller has a big problem, its labor costs are $4 million higher and they only produce $100,000 in revenue per employee .
In World Travelers view the employees of Company B, despite the fact that they get paid 1/20th of what the single employee of company A gets are exremely unproductive despite the fact that once the "other" costs were added they produced the same amount of revenue for $7 million less.
In our example company B took the savings and spent it on new airplanes and other equipment so by the end of the year they showed a loss of $4 million. Company A didnt buy anything and lost $2 million.
World Traveller would tell us that company B lost twice as much money as company A because their workers were 100 times less productive and their labor costs were $4 million higher.
The fact is that AA has maintained the same structure but has seen dramatic improvements in productivity no matter what measure is used, the gains seen at other carriers are distorted because they removed work and pay someone else to do it.
If company A produces 10 million in revenue has one employee that it pay $1million/year in compensation but pays out $11 million to vendors who provide the labor that produces that revenue then company A's productivity as measured by revenue per employee is $10 million.
If company "B" produces $10 million in revenue, does all its work in house and has 100 employees and pays then a total $5million ($50,000)in compensation then their productivity per that measure is only $100,000.
According to World Traveller the company A employee is 100 times more productive than company B employees despite the fact that company A spent $2 million more to produce the revenue than they actually generated once the vendor costs were added in while company B spent $7million less to produce the same revenue.
According to World Traveller company B has a severe productivity problem, their workers need to get their labor costs down to one million to be competitive! None of those other numbers matter, according to him.
When World Traveller looks at these companies he says that the fact that Company A pays $1million to its one employee doesnt mean anything because that one employee is so productive, according to his numbers, and he produces $10 million in revenue, company B on the other hand, according to World Traveller has a big problem, its labor costs are $4 million higher and they only produce $100,000 in revenue per employee .
In World Travelers view the employees of Company B, despite the fact that they get paid 1/20th of what the single employee of company A gets are exremely unproductive despite the fact that once the "other" costs were added they produced the same amount of revenue for $7 million less.
In our example company B took the savings and spent it on new airplanes and other equipment so by the end of the year they showed a loss of $4 million. Company A didnt buy anything and lost $2 million.
World Traveller would tell us that company B lost twice as much money as company A because their workers were 100 times less productive and their labor costs were $4 million higher.
The fact is that AA has maintained the same structure but has seen dramatic improvements in productivity no matter what measure is used, the gains seen at other carriers are distorted because they removed work and pay someone else to do it.
According to the figures he is using, yes. If AA fires its workers and subs the work out, regardless of what they pay the subcontractor, it makes us more productive and competative.
While we could use revenue per employee as a measure of productivity change within the company its only a valid figure if the amount of outsourcing and insourcing remains the same, and its still only a measure against revenue which could be altered many other ways (fares, load factors etc). AA has reduced the amount they outsource and dramatically increased the amount they insource, AA in Europe insources and incredible amount of work (and they get around $10/hr more than us).
Comparing us to other carriers that have drastically altered the amount they outsource is not a valid comparasion, I'm sure he knows that but he figures if he keeps saying it people will believe it..
Interested
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I know that feeling also. I used to be proud when I said I worked for AA. Now all I say is that I work in the airline industry. Only mention AA if someone asks.
What rule would that violate today?
Doesn't that go along the old saying. Tell a story enough and eventually everyone believes it.
eolesen
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He didn't say all of them were in maintenance.
Apply DL's workrules to AA, and you'd wind up with overages in just about every workgroup. Staffing ratios would change, some cities would be outsourced to ground handlers, and some markets would no doubt be flown by vendors operating 90 seat jets instead of mainline MD80's and 738's.
And yes, you'd see management layoffs as well, due mainly in part to supervisory ratios, but also in admin and back-office areas like revenue management, finance, HR and payroll where staffing is directly related to the number of employees, cities served, etc.
Bob complains about the metric that WT is referring to, and I actually agree --- productivity alone isn't the metric to compare. Stage length adjusted CASM is. Whether or not the company insources or outsources is neutralized when you look at cost per seat mile, and the industry analysts have a weighting model which further neutralizes things like average stage length so that you get a better comparison.
And there's no doubt AMR's sucks in comparison to the other guys. It will be even more apparent next week as financials start rolling out.
Frank Szabo
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That was my logic of a week or so ago.
Create enough VPs and the aircraft will not break anymore out of reverence and awe, enabling the so-called "management" infestation residing in Centrepork to rid the company of all mechanics.
World Traveler's (World Class Turkey) solution should make the company money as he'd eliminate more mechanics than there actually are - isn't that how a negative balance would work in one's favor?
In the immortal words of the bad-boy TV doctor Gregory House, "He's an idiot!"
AMR has certainly taken it on the chin in this quarter.
Now that the holy 3 way alliance is approved all bets are off. AMR could revisit the Bankrutcy question if things don't go their way in labor talks.
The Brits are calling the shots now anyway.
We're all one big family now, but Sir. Willie is at the head of the table.
That Turkey on the table ready to be carved is ..............Labor.
Frank Szabo
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It's amazing how the AMR BOD makes noises re: adequate compensation for their "management team" while said "team" does everything to improve their own finances and nothing to improve the business itself.
One would think these twits in Centrepork would have more pride in themselves with their "superlative" track record and find a job more suited to providing them with a compensation package that would better reward the level of "excellence" they bring to the company.
(Please excuse me a second whilst I raise my chair off the floor as is got rather deep in here.)
Bottom line, E - employee satisfaction is paramount to running a company and producing the desired results. Having dealt with many CPA-types over the years, I've only found one with any common sense. The accountants running American Air have flown the company into the ground re: labor relations (as they can't find a catagory to show the cost of employee goodwill on their balance sheet) with the assistance of their "wholly-owned subsidiary", the TWU, and there's no hope at this point of reversal.
Continue to stiff the employees and bargain in bad faith with the help/blessings of the union - that's how to "Win Friends and Influence People", as the book title goes. Some honesty on both part (co. and union) would have gone quite far in the past but that's not an acceptable way of doing business for these people nor, at this juncture, would have any effect on those doing the work as most believe now any communication from the company is a lie.
The damage to management/employee relations has been done and is irreparable at this point - many don't care anymore about getting a decent contract as much as they desire to see blood.
Feel free to inform me how wrong I am (as is your standard practice) by taking this attitude.
Frank Szabo
Veteran
Yep - Jimmy and Willie will fix the airline.AMR has certainly taken it on the chin in this quarter.
Now that the holy 3 way alliance is approved all bets are off. AMR could revisit the Bankrutcy question if things don't go their way in labor talks.
The Brits are calling the shots now anyway.
We're all one big family now, but Sir. Willie is at the head of the table.
That Turkey on the table ready to be carved is ..............Labor.
View attachment 8837
They've got to be related.
I've gotten to the point I wish the AMR BOD would file for Chapter 11 protection and get it over with. It's probably what's in store for us should any contracts be settled anyway.
WorldTraveler
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It is true that pure productivity will be lower because AA does in-house overhauls and if you count productivity alone, that doesn't provide the whole story.
That is precisey why I provided the number of 12K employees - which is the difference in employees DL or UA take to produce the same number of seats that AA produces.
I'd like someone to tell me how many employees this board thinks AA has devoted solely to overhauls... and I can assure you that it isn't 12K people. And I can also assure you that other carriers in fact do some amount of overhaul work in-house so you need to be real careful when saying that AA does a complete class of work that other carriers don't.
The simple fact is that AA's productivity problem exists throughout the company. Once again, I never said that maintenance is even half of the problem.
Stage length adjusted CASM is indeed a good measure to use to measure costs - but on that measure AA still is about 20% higher than other carriers. Total CASM includes all includes, including contractors. Other carriers didn't switch their work to outside vendors for free... they pay those vendors, even if it is less than what they would have paid in-house employees. And those who argue that AA has a revenue advantage simplly are not working with the facts. In the latest guidance AMR provided to Wall Street, it is expecting RASM to grow by about 10% compared with 15% for DL and even more UA. AA is not delivering the revenue growth that other carriers are which is why the labor costs are all the more burdensome.
DL does not have any contract carriers flying 90 seat aircriaft. The max is 76 seaters which is also true at UA, IIRC. CO has no 70 seat or larger aircraft but still has substantially lower costs than AA.
But the bottom line is that AMR continues to significantly underperform its peers ON THE BOTTOM LINE.
Pretending the problem does not exist or is a problem with management misses the real opportunity to fix the problem - and sentences AMR employees to the certainty of financial failure.
I can assure you that if employees don't care and are determined to extract blood from the company, it is NOT the company but the employees who will be hurt the most. AMR's stock price is already low enough that there is little damage should the company continue to slide -and the stock price will go down slowly enough with it. But if the company shuts its doors, every employee on the payroll plus a whole lot of retirees will pay handsomely for the unwillingness of labor to be part of finding a solution to AMRs problems.
No one is saying that management has been perfect... they have missed alot of opportunities and made plenty of bad calls.... but it is absolutely true that the executives will parachute away when the company goes down, leaving the rank and file employees high and dry.
Do you think any of the executives from Eastern have had any problems paying their mortgage?
That reality should put the burden on the employees to do something to fix their situation.
And, yes, I absolutely believe that part of AMR management's strategy all along has been to sell out to BA or turn enough of the company over to them to give them the presence in the US they want. But again, labor has the ability to turn the situation around if it wanted to.
At the current stock price, AMR could easily be purchased by its employees for about $2500 per employee.
If AMR employes actually purchased the company with the intent of growing it and preserving jobs, they could succeed. But remember that UAL was employee owned and was brought to its knees by pilots who were determined to squeeze the very last golden egg out of UAL... and they drove the company to operational disasters and within a couple of years, bankruptcy.
If AMR's employees are willing to trade ownership for increased productivity which is what it will take to bring costs down, the airline CAN grow and compete.
Until then, AMR and AA will continue to shrink and lose its historic revenue advantage.
That is precisey why I provided the number of 12K employees - which is the difference in employees DL or UA take to produce the same number of seats that AA produces.
I'd like someone to tell me how many employees this board thinks AA has devoted solely to overhauls... and I can assure you that it isn't 12K people. And I can also assure you that other carriers in fact do some amount of overhaul work in-house so you need to be real careful when saying that AA does a complete class of work that other carriers don't.
The simple fact is that AA's productivity problem exists throughout the company. Once again, I never said that maintenance is even half of the problem.
Stage length adjusted CASM is indeed a good measure to use to measure costs - but on that measure AA still is about 20% higher than other carriers. Total CASM includes all includes, including contractors. Other carriers didn't switch their work to outside vendors for free... they pay those vendors, even if it is less than what they would have paid in-house employees. And those who argue that AA has a revenue advantage simplly are not working with the facts. In the latest guidance AMR provided to Wall Street, it is expecting RASM to grow by about 10% compared with 15% for DL and even more UA. AA is not delivering the revenue growth that other carriers are which is why the labor costs are all the more burdensome.
DL does not have any contract carriers flying 90 seat aircriaft. The max is 76 seaters which is also true at UA, IIRC. CO has no 70 seat or larger aircraft but still has substantially lower costs than AA.
But the bottom line is that AMR continues to significantly underperform its peers ON THE BOTTOM LINE.
Pretending the problem does not exist or is a problem with management misses the real opportunity to fix the problem - and sentences AMR employees to the certainty of financial failure.
I can assure you that if employees don't care and are determined to extract blood from the company, it is NOT the company but the employees who will be hurt the most. AMR's stock price is already low enough that there is little damage should the company continue to slide -and the stock price will go down slowly enough with it. But if the company shuts its doors, every employee on the payroll plus a whole lot of retirees will pay handsomely for the unwillingness of labor to be part of finding a solution to AMRs problems.
No one is saying that management has been perfect... they have missed alot of opportunities and made plenty of bad calls.... but it is absolutely true that the executives will parachute away when the company goes down, leaving the rank and file employees high and dry.
Do you think any of the executives from Eastern have had any problems paying their mortgage?
That reality should put the burden on the employees to do something to fix their situation.
And, yes, I absolutely believe that part of AMR management's strategy all along has been to sell out to BA or turn enough of the company over to them to give them the presence in the US they want. But again, labor has the ability to turn the situation around if it wanted to.
At the current stock price, AMR could easily be purchased by its employees for about $2500 per employee.
If AMR employes actually purchased the company with the intent of growing it and preserving jobs, they could succeed. But remember that UAL was employee owned and was brought to its knees by pilots who were determined to squeeze the very last golden egg out of UAL... and they drove the company to operational disasters and within a couple of years, bankruptcy.
If AMR's employees are willing to trade ownership for increased productivity which is what it will take to bring costs down, the airline CAN grow and compete.
Until then, AMR and AA will continue to shrink and lose its historic revenue advantage.
MCI transplant
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<_< ------- Traveler, what your suggesting is taking "control" out of the hands of the elitist's!-------- No pun intended,------- but it'll never fly!!!-------- Never the less, he does bring up an option that, to this point, hasn't been explored! ------Would the membership consider taking more control, in the form of say, a representative member, with voting rights, on the Board of Directors, in exchange for, say,"retro", or something else?
eolesen
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No MCI, it could fly, but it would be a really bad idea. You'd have a better chance of an armchair quarterback lasting an entire quarter in a real NFL game than making an employee owned airline work to the employee's benefit. Likewise with union representation on the board. Sounds great, but then reality starts to set in. The union board reps at UAL discovered that they not only had a responsibility to their members, but a fiduciary responsibility to the shareholders. The members lost.
Mexicana's pilots thought they knew better than management, so they brought in an outsider to buy the company after they filed for bankruptcy.
The CEO quit, and a week later, the outsiders decided perhaps it wasn't such a good idea to have bought the airline in the first place, so they shut it down and cut their losses. That was just over a month ago, and they haven't flown since.
Just wait. All those employees who are so quick to criticize management's capabilities & strategy are going to be among the first ones to say they have no interest in owning the store. Ownership brings too much responsibility.
In short, they just want a paycheck that won't bounce, and don't really want to be bothered with little things like whether or not payroll can be met for next week....
Mexicana's pilots thought they knew better than management, so they brought in an outsider to buy the company after they filed for bankruptcy.
The CEO quit, and a week later, the outsiders decided perhaps it wasn't such a good idea to have bought the airline in the first place, so they shut it down and cut their losses. That was just over a month ago, and they haven't flown since.
Just wait. All those employees who are so quick to criticize management's capabilities & strategy are going to be among the first ones to say they have no interest in owning the store. Ownership brings too much responsibility.
In short, they just want a paycheck that won't bounce, and don't really want to be bothered with little things like whether or not payroll can be met for next week....
MCI transplant
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<_< ------- Well, something else to think about! If the price of AA's stock goes too low, and cash on hand gets too big, there are people like Uncle Carl Icahn still out there that would love to take control of AA, and suck it's assets dry!----- Take it from someone who's lived through it, what's left ain't pretty! He's still got a score to settle with AA over screwing him out of "Karibou" in TWA's bankruptcy.
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