It has been some time ago, but some independent very raw (Eric) calculations were done where adding $5.00 to a ticket price would increase the Mechanic & Related base wages to the desired amount at that time. S if you basically added a small fee to the ticket price culd not the labor cost be more effectively controlled?
except that pricing in the industry is not controlled by costs, but by competition.
AA mechanics might want a fare increase to increase their pay but airline X has employees who are willing to work (relatively peacefully) for the salary they make.
Raising fares also results in a decrease in demand... that is a fact of pricing.
Airline X is a competitor of AA...they are not interested in raising prices and have costs low enough that they can determine the pricing levels.
AA has no choice but to match airline X's fares or lose market share - because air travel is essentially a commodity. For the vast majority of people, price is the number one purchase factor.
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It is precisely because AA's costs are above its competitors that it loses money at fares that other airlines charge... and AA has no choice but to match those fares or lose customers.
The fact that AA's RASM increased in the most recent quarter ONLY where they decreased capacity or increased it only to industry average levels shows that AA has no pricing power on a system basis in its markets... customers are not willing to pay more for AA's services. We need to see the rest of the industry but analysts expect that AA will once again underperform the revenue performance of its peers.
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No, AA did not plan this BK in 2003. They had every intention of turning the company around. But they made very faulty assumptions about who would fail to reorganize and were quite surprised when they found out they are competing with airlines who all managed to successfully reorganize - the highest percentage of successful Chapter 11 restructurings in airline industry over a given time period.
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AA mgmt's miscalculations and its unwillingness or inability to use the advantages it gained in its own out of court restructuring are what has doomed AA at this point.
Given that no other major competitor of AA is in the financial situation AA is in and demand for ALL carriers shrinks as fare levels raise in response to higher fuel, there are enormous competitive pressures on AA. Other carriers have aircraft assets they need to redeploy in order to avoid shrinking their operations. As in any business, AA's competitors will redeploy their assets where they believe they have the greatest chance of making a profit... and if that profit comes becomes they can successfully steal passengers today and weaken AA over the long term, that is where they will grow. The fact that AA is seeing more competitive growth in its key markets than any other carrier shows that AA is seen by the industry as highly vulnerable.
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Given that AA's financial damage is very deep and it is highly unlikely they can resolve it without very severe employee cuts similar to the size that have doomed every other airline, the prospects for AA are not good, regardless of whether they reorganize in C11 or not.
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The only way that AA can pay the enormous debt levels it has now and will have in the future with its new fleet is by extracting huge pay cuts from its labor force.
Other airlines who are much larger or have lower costs will price the seats that AA will sell. AA's ability to service its debt levels which are at and will be at much higher levels than its competitors can only be sustained through employee wage cuts.
The notion that AA will possess a fuel cost advantage relative to its peers denies the fact that AA's competitors are replacing their own fuel-inefficient aircraft but at much lower overall cost.
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Those who want to finish a career at AA should put as much of their own money away in savings to cover the inevitable cost cuts and reduction in pension benefits; those who have the flexibility to leave should be making plans to do so.