Brundage now says labor is a brick in AA's backpack

[FWAAA]

At the current stock price, AMR could easily be purchased by its employees for about $2500 per employee.

Nope, WT, even after today's huge stock price decline, a purchase of AMR by the employees would require a bit more than $25,000 per employee. In early 2003, when AMR was trading for around $2/sh, the employees could have purchsed the company for less than $5,000 each.

 

[WorldTraveler]

Nope, WT, even after today's huge stock price decline, a purchase of AMR by the employees would require a bit more than $25,000 per employee. In early 2003, when AMR was trading for around $2/sh, the employees could have purchsed the company for less than $5,000 each.

you're right FWA... it is 10X more than what I said.... but AA has 2X more cash than its stock price....

I don't realistically expect that any financier is going to help AMR's employees do an employee buyout simply because unless the employees are willing to increase productivity, the results will be no different from what exists today.

I am fully aware of the disaster that UAL's employee ownership was which is why things will have to be a whole lot different if the concept were ever repeated.

The only thing an employee buyout would accomplish is that AMR employees could put in leadership that they think can help them - and the best thing for AMR employees is growth - there is no doubt that they will have to work harder. The question is can that "sweat equity" be offset by reducing the amount of layoffs that really would need to occur to bring AA back to competitive labor costs.... which is the only way AA can grow.

In a less radical form, DL gave its pilots a seat on the board after its concessionary contract in 1996 (?). While DL has other labor groups represented in the boardroom, only the pilots have a voting seat, IIRC. I don't know if that is part of the reason DL and ALPA generally have a pretty good relationship but it sure bears consideration.

At this point, unless AMR employees take some control of what happens with the company, they will continue to watch the company carved up and handed to others on a silver platter - ala the picture earlier.

 

[MCI transplant]

<_< ------ Hey world! Don't panic! You've convinced me!!!

 

[Mr Red]

you're right FWA... it is 10X more than what I said.... but AA has 2X more cash than its stock price....

I don't realistically expect that any financier is going to help AMR's employees do an employee buyout simply because unless the employees are willing to increase productivity, the results will be no different from what exists today.

I am fully aware of the disaster that UAL's employee ownership was which is why things will have to be a whole lot different if the concept were ever repeated.

The only thing an employee buyout would accomplish is that AMR employees could put in leadership that they think can help them - and the best thing for AMR employees is growth - there is no doubt that they will have to work harder. The question is can that "sweat equity" be offset by reducing the amount of layoffs that really would need to occur to bring AA back to competitive labor costs.... which is the only way AA can grow.

In a less radical form, DL gave its pilots a seat on the board after its concessionary contract in 1996 (?). While DL has other labor groups represented in the boardroom, only the pilots have a voting seat, IIRC. I don't know if that is part of the reason DL and ALPA generally have a pretty good relationship but it sure bears consideration.

At this point, unless AMR employees take some control of what happens with the company, they will continue to watch the company carved up and handed to others on a silver platter - ala the picture earlier.

That employee owmerdhip worked real well at UNITED !!!give me a break,

 

[Hopeful]

I would not be interested in employee ownership. What I am interested in is working for a company where they do not continue to beat down the worker time after time. I would be perfectly content working under a management that is competent and fair. I don't want a piece of the company, that just doesn't work, especially with a company of this size.
This is an industry that declared war on the unions, let alone the average airline worker. They will not be happy until all they give us is a paycheck for a weeks work, nothing more.
Maybe the pro-corporation types believe that if management wasn't restricted by cumbersome labor agreements, AA would be oh so profitable.
To those people, I say look at what their pet union, the TWU, has given back since 1983. Essentially everything the company desired, but in return received only a pittance for its members.
The TWU isn't the only group that needs to be ousted. Current AA management needs to go as well.

 

[TIME FOR CHANGE]

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.

.

The only thing that changes is the color on the tail 😉

 

[Bob Owens]

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.

My guess, around 9k, 6000 union workers and 3000 mgmnt and support staff.

As far as the checks I dont believe any other US carrier dissasembles and aircraft to the same degree as AA. A "C" check varies, even within the carrier, each airline comes up with their own version.

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.

No, you just kept it very general and used rev per employee as the basis of your arguement, we just showed how the foundation of your arguement is baseless.

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.

How does AA compare with flat out numbers, without "adjustments"? And why is that verion better than striaght numbers?

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.

Well the fact is that the costs as far as CASMs are higher for smaller jets, AMR has Eagle, that drives its CASMs way up.


Bottom Line is that all that really matters is that AA can pay its bills and conduct its business.

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.

We dont want blood, we dont want a fight, we just want the money we are due. Everybody else is getting theirs and if we dont show up for work nobody gets anything.

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.

Perhaps but we are already high and dry. Yesterday another long time coworker of mine quit, went to the FAA, he is in his late 40s. We really dont have much to lose, even in this economy there are jobs for people who have the skills we have.

Do you think any of the executives from Eastern have had any problems paying their mortgage?

Nope and I also know that the EAL guys who said NO made out better than the Pan Am and TWA guys who kept giving concessions to save doomed companies. Sometimes you just have to let it die to make the ground fertile for others to grow, then get on with the survivors. If AMR is really that bad off, which I dont believe they are, then we still should get as much money out of it as we can, before it dies. Working for less is never a good strategy.

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.

Hmm, wasnt UAL on its knees when it was pawned off to its employees? The stock later soared but the employees could not sell it, buying it at top dollar only to watch it become worthless. Were pilots the cause of Delta, USAIR and NWAs filings as well?

Airlines generate cash for other businesses, its like a boat, its nicer to have the use of a boat than to own it.

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.

The fact of the matter is that no matter how much we increase productivity the company will never be willing to just give us a fair wage. They are the ones looking for a fight, not us.

They are bringing in around $4 billion a year more with 200 less airplanes and 30000 less employees and those who reamain are still working under paycuts. Where is all that additional cash going? The workers at UAL and CAL are not our competitors, they arent absorbing all that additional cash that our increased productivity is generating, Citibank, Exxon, PONY, Massport, Boeing, Honeywell etc are our competitors, they are the ones that we have to compete with for the our share of the $22 billion that our labor generates. They are the ones sucking out the additional revenue and all our concessions and they will never get to the point where they say "lets leave something for the workers" unless we show them that we are willing to shut the whole thing down and turn off the cash spigot.

 

[chris perry]

you're right FWA... it is 10X more than what I said.... but AA has 2X more cash than its stock price....

I don't realistically expect that any financier is going to help AMR's employees do an employee buyout simply because unless the employees are willing to increase productivity, the results will be no different from what exists today.

I am fully aware of the disaster that UAL's employee ownership was which is why things will have to be a whole lot different if the concept were ever repeated.

The only thing an employee buyout would accomplish is that AMR employees could put in leadership that they think can help them - and the best thing for AMR employees is growth - there is no doubt that they will have to work harder. The question is can that "sweat equity" be offset by reducing the amount of layoffs that really would need to occur to bring AA back to competitive labor costs.... which is the only way AA can grow.

In a less radical form, DL gave its pilots a seat on the board after its concessionary contract in 1996 (?). While DL has other labor groups represented in the boardroom, only the pilots have a voting seat, IIRC. I don't know if that is part of the reason DL and ALPA generally have a pretty good relationship but it sure bears consideration.

At this point, unless AMR employees take some control of what happens with the company, they will continue to watch the company carved up and handed to others on a silver platter - ala the picture earlier.

I think we should ante up the 25k and hire BOB Crandal and Herb K to run things,the way they should be!!!!!!!

 

[787nightmare]

I think we should ante up the 25k and hire BOB Crandal and Herb K to run things,the way they should be!!!!!!!

2 points........
First Crandall and Kelleher would never gel, and would drink themselves to death. Crandall is too hardline, Kelleher is too much a people guy.
Secondly, you wouldn't dig what they'd want to do to this sick company & employee staffing(or maybe it would be the pilots wouldn't like it!)

But I do like the 2 nominees. 🙂

 

[midnights]

When I grow up I wanna be a Cinder block!

 

[FWAAA]

They are bringing in around $4 billion a year more with 200 less airplanes and 30000 less employees and those who reamain are still working under paycuts. Where is all that additional cash going?

Fantasyland. Actually, most all the extra cash went to fuel last year.

First things first. Revenue isn't $4 billion more than 2003 - last year it was $2.5 billion more. In 2003, AMR took in $17.4 billion in revenue and last year's AMR revenue was $19.9 billion.

Total labor/wage expense last year was $450 million less than in 2003. Fuel, on the other hand, was $2.75 billion more in 2009 than in 2003.

Your $4 billion average drumbeat may sound nice, but it's inconsistent with reality.

Looking back to 2008, instead of 2009, revenue was $6.3 billion more in 2008 than in 2003, but fuel was $6.25 billion higher in 2008 than in 2003.

Where has all the additional cash gone? Oil companies. Fuel prices were up in the first half of this year over the same period in 2009, so it's likely that the answer will be the same in January, 2011 when the full-year results are in. 2010 revenue will be up from 2009 but so will fuel prices. Fuel prices have soaked up the excess revenue most years since 2003.

 

[Joe Patroni]

Where has all the additional cash gone? Oil companies.

And now you know why I left the airline and went to work for an oil company.

 

[Barfbag]

<_< ------- 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.

Uncle Carl cashed out when he sold TWA's London routes to AMR for a mere 700 million.

He's never lost, and he's now worth close to 20 Billion

These LHR routes are the only reason why British Airlines even talked to AMR about the Trans-Atlantic Antitrust Immunity and Joint Business Venture in the first place.

Airline investing by Carl ?

I don't think so.

AMR has niothing left, everything is leveraged. Where's the beef ?

There's no beef here, just a shell with an AA sticker.

Wolves like beef.

 

[eolesen]

AMR has niothing left, everything is leveraged. Where's the beef ?

Not true. AA owns 383 aircraft, has capital leases on another 86, and operating leases on 205.

American Airlines Aircraft
                  Own  CapL   OpL  Total
Boeing 737-800     77    -    31   108
Boeing 757-200     84    9    31   124
Boeing 767-200      3   11     1    15
Boeing 767-300     45    2    11    58
Boeing 777-200     47    -     -    47
Douglas MD-80      93   58   107   258
Total Active      349   80   181   610

	 	 	 	 	 	 	 	 	 	 	 
Airbus A300-600R   10    -    18    28
Fokker 100          -    -     4     4
Douglas MD-80      24    6     2    32
Total Inactive     34    6    24    64

There's also some thought that AAdvantage and Eagle have untapped value that's not reflected in the current shareprice, which is why there's been such a push to consider spinning them off, regardless if ownership changes (similar to how Sabre was spun off).

IIRC, AMR also owns a lot of real estate, including the Flight Academy, HDQ buildings, and the Learning Center. Pretty certain they own AFWs buildings, but lease the land.

 

[will fix for food]

Well the fact is that the costs as far as CASMs are higher for smaller jets, AMR has Eagle, that drives its CASMs way up.

I think that is a little dramatic. Yes, the CASM's on the smaller planes are higher, but Eagle's ASM's are still relatively small compared to A/A's so Eagle won't be skewing the number all that much.

I tried to find numbers for CASM's for A/A and Eagle but couldn't find them in a quick search. There are some interesting numbers here though:

http://ostpxweb.dot.gov/aviation/finance/fin20101.pdf

Page 17 is interesting.