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

[FWAAA]

In the second quarter, AA's mainline jet CASM was 12.62 cents:

http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9Mzg5NzYxfENoaWxkSUQ9MzkyODQ4fFR5cGU9MQ==&t=1

Eagle's CASM isn't stated separately and it's impossible to figure out Eagle's precise costs, but consolidated RASM (counting both mainline jet plus Eagle) was 13.23 cents. Regional operations don't distort AA's CASM any more than they do at UA, DL, CO or US. Everyone knows (and agrees) that regionals have higher CASM but they also generally have much higher RASM as well.

 

[Duke787]

I understand why AA executives have one executive as a heavy (Brundage), but did they intend for him to be a horse's arse? No reason to insult the employee's of AA, we're not the one's making the decisions.

I don't understand why the board keeps these guys around other then Horton. He was working else where during the most monumental mistakes of our recent past. Who is going to steal this brain trust from AA, and if a company did, wouldn't we be better off?

 

[eolesen]

I understand why AA executives have one executive as a heavy (Brundage), but did they intend for him to be a horse's arse? No reason to insult the employee's of AA, we're not the one's making the decisions.

Point of order... Go re-read the quote, starting with the preceding paragraph.

Nowhere were employees called a brick, or otherwise insulted.

The reporter starts out discussing the $600m difference in labor costs.

He responds it's a big brick in our backpack.

Note that he didn't say labor was a brick in a backpack, nor did he say employees were a brick in a back pack.

Looks to me like y'all got all whipped up in a frenzy about something that wasn't even said....

 

[Ken MacTiernan]

Point of order... Go re-read the quote, starting with the preceding paragraph.

Nowhere were employees called a brick, or otherwise insulted.

The reporter starts out discussing the $600m difference in labor costs.

He responds it's a big brick in our backpack.

Note that he didn't say labor was a brick in a backpack, nor did he say employees were a brick in a back pack.

Looks to me like y'all got all whipped up in a frenzy about something that wasn't even said....

As THE Senior Vice President for Human Resources Brundage's words were received EXACTLY as they were intended. He might have been speaking about the labor costs but he was alluding to LABOR! We are one in the same; labor = cost.

Let me guess, when American Airlines handed out 100,000 Grand candy bars in the first quarter of this year when they handed out the AIP checks this was not an insult.

Let me guess, when American Airlines received concessions and then gave top executives millions of dollars in bonuses this was not an insult.

Let me guess, the "shAAred sAAcrifice" slogan was the truth. It wasn't an insult.

Let me guess, American Airlines dragged their feet for two years in negotiations only to peddle ANOTHER concessionary contract this was not an insult.

Now UPPER management makes an analogy like this and we shouldn't get "whipped up in a frenzy"? Sorry Eric, but being insulted for 7 years and counting is enough.

 

[Bob Owens]

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.

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

And in 2008 it was $24 billion, add up the totals post 2003 and divide them by the number of years, sibtract the $17.4 and it comes to around $4 billion on average. They should bring in around $22 billion this year.

Total labor/wage expense last year was $450 million less than in 2003.

That in itself requires some explaination, maybe the discrepany with total wages is the reason AMR filed a request to the SEC to hide information.
Union workers are all still earning less than we were in 2003, we gave a billion in concessions, plus they shed 30,000 jobs so how come labor expense was only down $450 million? 30,000 jobs , even if we didnt take any paycuts should have lowered their labor costs by at least $1.8 billion.

 

[eolesen]

And in 2008 it was $24 billion, add up the totals post 2003 and divide them by the number of years, sibtract the $17.4 and it comes to around $4 billion on average. They should bring in around $22 billion this year.

Start looking at some of the variances, like fuel in 2008 being $9B compared to $2.7B in 2003. When you look at revenue ex-fuel, AA's been flat-lined the last two years.

Year                         2009     2008     2007     2006     2005     2004     2003     2002     2001     2000
Total operating revenues     19917    23766    22935    22563    20712    18645    17440    17299    18963    19703
Wages/salaries/benefits       6807     6655     6770     6402     6755     6719     7264     8392     8032     6783
Aircraft fuel                 5553     9014     6670     6813     5615     3969     2772     2562     2888     2495
Total operating expenses     20921    25655    21970    21503    20805    18789    18284    20629    21433    18322
                                   
Revenue minus fuel           14364    14752    16265    15750    15097    14676    14668    
Operating profit/loss        -1004    -1889      965     1060      -93     -144     -844

Employees                    78900    84100    85500    86600    88400    92100    96400   109600

That in itself requires some explaination, maybe the discrepany with total wages is the reason AMR filed a request to the SEC to hide information.

And what request are you referring to? The one about the purchase agreements with Boeing and Bombardier that were discussed yesterday? Go thru any airline's 10-K and show me where a commercial agreement *isn't* treated as confidential and redacted.

Or is there some other super-secret document that you've discovered?...

Union workers are all still earning less than we were in 2003, we gave a billion in concessions, plus they shed 30,000 jobs so how come labor expense was only down $450 million? 30,000 jobs , even if we didnt take any paycuts should have lowered their labor costs by at least $1.8 billion.

It's actually 1.5B lower with the pay cuts *and* the 30,700 jobs cut since 2002. But don't forget that it's not just wages, but wages & benefits.

Look again at the stats above. The average employee count has been dropping steadily since 2002, yet with the exception of 2006, wages & benefits have been rising. And that's without taking into consideration new contracts...

 

[FWAAA]

That in itself requires some explaination, maybe the discrepany with total wages is the reason AMR filed a request to the SEC to hide information.
Union workers are all still earning less than we were in 2003, we gave a billion in concessions, plus they shed 30,000 jobs so how come labor expense was only down $450 million? 30,000 jobs , even if we didnt take any paycuts should have lowered their labor costs by at least $1.8 billion.

I'm sorry, Bob, I thought you knew that the concessions in 2003 didn't start until May 1 and thus, 2003 wage and salary expense didn't fall by the entire $1.8 billion from the 2002 numbers. The 2004 wage and salary expense was just about exactly $1.8 billion smaller than in 2002.

Wage expense has been climbing slowly since 2004 as employees continued to receive step increases. You may be topped out but thousands of FAs, for example, have been climbing their seniorty ladder and receiving step increases as they progress toward top-out. Average wage expense per employee climbed after the concessions because the typical furloughee earned less than those who kept their jobs.

Additionally, the piddly 1.5% raises granted for five years under the concessions from 2004-08 total 7.73%, causing wage and salary expense to climb - helping to keep that line item up even as AA continued to furlough employees during the past several years.

 

[Bob Owens]

I'm sorry, Bob, I thought you knew that the concessions in 2003 didn't start until May 1 and thus, 2003 wage and salary expense didn't fall by the entire $1.8 billion from the 2002 numbers. The 2004 wage and salary expense was just about exactly $1.8 billion smaller than in 2002.

Actually some of our concessions were retro. Anyhow, I used the 2003 revenue figures for comparasion, where did I say that 2003 didnt see the full $1.8 billion decline? We took the paycuts and saw total headcount decline by 30,000 workers yet the savings fall very far short, even after counting the 1.5% increases.

Wage expense has been climbing slowly since 2004 as employees continued to receive step increases. You may be topped out but thousands of FAs, for example, have been climbing their seniorty ladder and receiving step increases as they progress toward top-out. Average wage expense per employee climbed after the concessions because the typical furloughee earned less than those who kept their jobs.

Nice try, but most of the FAs that were laid off were topped out TWA flight attendants with max vacation, sick time etc, you also have to remember that even if that was the case(step raises) that there is a constant exodus of people retiring who are topped out already. The number of people leaving at top pay was greater than the number coming back who would see step increases. If headcount had remained the same that would be a plausible explaination but it hasnt, its gone down, so even if we had thousands of workers getting step increases it would not drive the cost up if the total number of heads is going down. At best it could explain a modest increase in the increase in average compensation, but not a $10,000 increase.

Additionally, the piddly 1.5% raises granted for five years under the concessions from 2004-08 total 7.73%, causing wage and salary expense to climb - helping to keep that line item up even as AA continued to furlough employees during the past several years.

There were a lot of announced furloughs but the actual number was not that high after 2004. In our most recent RIF nobody had to hit the street, we still have vacancies even after closing the MCI base and closing or shrinking several other stations. Most of the lost headcount post 2004 was from the top as people retired, resigned, SIS, VBR, etc. So if anything, when you factor in vacation and the fact that they were at top pay costs still should have declined. The loss of one head at top pay would make up for around 20 people moving up a step, if not more. Normally when you have a layoff and you layoff those on the bottom your average costs would go up, but thes are not normal times, because of the aquasition of TWA those on the bottom had max pay and benifits while those still on steps were in between. If they get recalled they dont go up steps and they eplace someone else who is topped out so there is no increase (or decrease) in costs. So by laying off the TWA flight attendants they increased the ratio of those who were not at top pay and benifits so the average cost should have gone down simply from that, then factor in that everybody took at least a 25% cut in compensation, some took even more like Pilots who got knocked out of the left seat and mechanics who were knocked down to OSMs.

Sorry but the numbers, and your excuses, just dont add up.

 

[Bob Owens]

Year                         2009     2008     2007     2006     2005     2004     2003     2002     2001     2000
Total operating revenues     19917    23766    22935    22563    20712    18645    17440    17299    18963    19703
Wages/salaries/benefits       6807     6655     6770     6402     6755     6719     7264     8392     8032     6783
Aircraft fuel                 5553     9014     6670     6813     5615     3969     2772     2562     2888     2495
Total operating expenses     20921    25655    21970    21503    20805    18789    18284    20629    21433    18322
                                   

Employees                    78900    84100    85500    86600    88400    92100    96400   109600

And what request are you referring to? The one about the purchase agreements with Boeing and Bombardier that were discussed yesterday? Go thru any airline's 10-K and show me where a commercial agreement *isn't* treated as confidential and redacted.

It doesnt say what they want to keep secret. Just says they want to keep it a secret for a long time.

View attachment 8839

It's actually 1.5B lower with the pay cuts *and* the 30,700 jobs cut since 2002. But don't forget that it's not just wages, but wages & benefits.

That was your buddys number not mine.

Look again at the stats above. The average employee count has been dropping steadily since 2002, yet with the exception of 2006, wages & benefits have been rising. And that's without taking into consideration new contracts...

Thats exactly my point. Why are the costs up over $10,000 per employee on average? We arent getting it. Why dont we see a bigger savings? 30,000 less employees should come out to at least $2 billion in savings, then factor in that we are all still earning around 18% less something is way out of whack with that number.

 

[Winglet]

Brundage is what Mr. Arpey wants him to be and wants him to say. His words are carefully chosen for the desired affect. He knew exactly what he was saying and how it would be taken. Don't let these tactics distract from the end game. I really don't care what he says. What I care about is getting a management team with some leadership qualities and that wants to run an airline and not a travel agency.

The brick analogy refers to something worthless that only impedes progress.

We used to be "cost units." Looks like we are now "bricks."

 

[Mr Red]

Brundage is what Mr. Arpey wants him to be and wants him to say. His words are carefully chosen for the desired affect. He knew exactly what he was saying and how it would be taken. Don't let these tactics distract from the end game. I really don't care what he says. What I care about is getting a management team with some leadership qualities and that wants to run an airline and not a travel agency.

The brick analogy refers to something worthless that only impedes progress.

We used to be "cost units." Looks like we are now "bricks."

And they wonder why people are ready to burn it down !!!

 

[FWAAA]

It doesnt say what they want to keep secret. Just says they want to keep it a secret for a long time.

View attachment 8839

If you had read the 10-K, you'd know that Exhibits 10.150 and 10.151 are the aircraft purchase agreements.

This isn't rocket science.

 

[Bob Owens]

If you had read the 10-K, you'd know that Exhibits 10.150 and 10.151 are the aircraft purchase agreements.

This isn't rocket science.

OK if you say so. I thought the 10K came out in the spring, this was just filed 3 days ago.

So, whats the explanation for the fact that despite the fact we are earning less than we were in 2003 but average pay went up $10,000? Why doesnt the total wage refect the savings from shedding 30,000 workers plus the paycuts that the remaining workers endured?

By the way we have a five year progression to top pay, there are very, very few, if any mechanics, that are not at top rate.

 

[FWAAA]

OK if you say so. I thought the 10K came out in the spring, this was just filed 3 days ago.

It's an order of the SEC in response to a request AMR filed in February along with the 10-K. Dunno why the SEC waited until Sept 22 to approve the request for confidential treatment. Most of the confidentiality requests I've filed with the SEC have been approved in much less time. As the Order itself says:

AMR Corporation submitted an application under Rule 24b-2 requesting confidential treatment for information it excluded from the Exhibits to a Form 10-K filed on February 17, 2010.

Based on representations by AMR Corporation that this information qualifies as confidential commercial or financial information under the Freedom of Information Act, 5 U.S.C. 552(B)(4), the Division of Corporation Finance has determined not to publicly disclose it. Accordingly, excluded information from the following exhibit(s) will not be released to the public for the time period(s) specified:

Exhibit 10.150 through December 31, 2017
Exhibit 10.151 through January 1, 2019

The average wage/salary/benefit expense per employee for AA mainline employees (from the AA 10-Ks, not the AMR 10-Ks so as to exclude Eagle) has increased from $81,329 in 2002 to $93,504 in 2009 - that's an increase of over $12,000. I've posted various explanations (as has eolesen) but you've not been satisfied with them. FAs have a much longer progression to top-out and thus, thousands of them hired throughout the 1990s saw their pay increase each year following the concessions. Same with pilots hired in the late 1990s. Yes, the TWA FAs were topped out, but pilots and mechanics weren't just stapled, so the furloughs included nAAtives as well as TWA vets.

I actually agree with you - you'd think that with all the retirements over the past seven years that the average wage expense would not have increased quite as much as it has.

Average AA FA wages have increased from about $42k in 2002 to about $51k in 2009:

http://www.airlinefinancials.com/airline_data_comparisons.html (chart #64)

If average wage has increased by $9,000/year, then average wage/salary expense to AMR has easily increased by $11k or $12k. AA's cost for medical insurance has increased since 2002 despite the increases charged to the employees.

Chart #63 shows that the average wages for AA pilots has increased by about $10k over the same period. Add in the taxes and benefits and AA's pilots probably cost about $12k more per year on average. Dunno about fleet or agents, but perhaps their average wage expense has increased by similar numbers. As to mechanics, perhaps overtime has ballooned, which would increase the average cost per employee.

I realize that the insatiable desire for conspiracy theories about management pay are driving the bus here, but it's pretty obvious that the concessions, while deep and painful, are constantly overstated and exaggerated. Just days before September 11, 2001, the FAs ratified their new contract with large pay raises. A few weeks after September 11, the TWU ratified their large pay-raise contract. As to those two groups, the concessions merely placed the employees back where they were in summer of 2001 before their large raises.

 

[heckle and jyde]

http://www.bloomberg.com/news/2010-09-21/american-struggles-with-costs-unions-as-mergers-erase-top-airline-status.html

I don't know about everyone else, but I'm more motivated now than ever.

I too am motivated.I expect my motivation to peak around Dec. 24