They continually, as some greed supporters on this forum do, compare their compensation to execs at other companies. They like to remind us that other airlines which filed for bankruptcy hurt their employees more, and that we should be "grateful."
They need to be reminded that thanks to billions in concessions, AA has been able to sock away about $5 billion in cash and help the stock climb to nice levels.
Since you're not a pilot, you really didn't benefit all that much by AMR not filing for bankruptcy protection. Truth be told, the pilots and maybe the overhaul mechanics gained the most by avoiding bankruptcy.
That the pilots benefitted the most is obvious: they still enjoy a huge defined benefit pension (several times the PBGC-guaranteed maximum for retired-at-age-60 workers). Plus, don't they still have an option to take half in a lump sum at retirement? The way the stock market has recovered, that alone can be $1.5 million or more.
After the pilots, the overhaul mechanics probably benefitted most - since in Ch 11, the temptation to get out of all the obligations related to the maintenance bases and ship the work overseas would probably have been too great to ignore. Like every other airline has done. Like over at UAL.
So if some management toady tells you to be grateful that AMR did you a favor by not filing for Ch 11 - tell 'em to shove it. Cause you're right about that one.
About the $5 billion in cash, as
eolesen pointed out, there's more than just concessions behind the current cash balance: Don't forget to add the $1.5 billion or so raised in new stock sales since the concessions - $900 million in the past 9 months in two separate offerings. And don't forget to add more than a billion of new debt borrowed in 2003-04 after the concessions.
Last year, AMR's cash flow from operations was $1.9 billion, just a little more than the $1.8 billion of annual pay concessions. Take away those wage savings, and AMR would have been cash flow break even.
Break even doesn't pay down the $3 billion of new debt borrowed between September, 2001 and April, 2003 to fund the pre-concession paychecks when cash flow was negative. Break even doesn't pay down the $2 billion of pension plan underfunding. Break even doesn't pay for new fuel efficient airplanes that didn't look like such a pressing need when fuel was $0.55/gal a few years ago but are a number one concern
now that fuel is around $1.80 - $2.00/gal.
What bankruptcy avoidance did was take the total market cap of AMR from $225 million in March, 2003 and expand it by 3,400% to the present level of more than $7.6 billion. The stock went from $1.50/sh to over $32/sh today (and hit $41 a while back). The shareholders are pretty happy about that growth in wealth. So the greedy bastard executives have decided to take their cut in the form of roughly $300 million of extra stock over two years (so far). Yawn. Nothing outrageous to see here.
Compare that to the UAL execs who asked for 15% and got 8% of the new stock of UAL (UAUA) merely for guiding UAL thru bankruptcy, slashing wages, terminating pensions, closing all heavy airframe overhaul and spending over $660 million on bankruptcy lawyers, accountants, investment bankers and consultants - you know - their friends. That 8% take was valued at about $480 million early last year. Dunno what it's currently worth. The PUP payouts' formula is flawed, with far too much emphasis on stock price growth and not enough on internal results - but compared to what happened at UAL, the bottom line dollars are very reasonable.
If AMR had filed for Ch 11, and the execs followed the UAL roadmap, their stock payout upon Ch 11 exit would have easily been equal to the half billion that UAL's execs got and likely would have been more. AMR would have likely spent nearly a billion dollars on Ch 11 fees and expenses. The pilots would be broke compared to where they are now. Lots and lots of mechanics would be selling homes in Tulsa and Kansas City and maybe even Fort Worth and looking for work.
Avoiding bankruptcy helped some and probably hurt others (relative to what would happened to them in Ch 11).
Bob Owens said:
The difference is we are comparing ourselves to people in the same industry, they are comparing themselves to people in other industries. So they arent doing the same.
If we were to compare ourselves to similarly skilled people outside of this industry then we would have even more of an arguement.
Besides the growing general concensus throughout society is that executives are over compensated, so argueing that others get paid more really doesnt carry much validity, the real question is "does what they do warrant such compensation?" I would say that no employee could work hard enough or enough hours in a year to justify millions of dollars in salary in a single year unless his job was so risky that he stood a good chance of dying on the job.
One reason that airline execs compare themselves to execs in other industries is that their skills (whatever those may be) transfer fairly readily. A chief financial officer for an airline who is good at what they do can work for any major corporation - it doesn't have to be an airline. Same for most other MBA-holding executives, be it Marketing, Finance, Accounting, etc.
The nuts and bolts operations executives who have learned how to run an airline system with 4,000 daily flights and 100k employees are a little less marketable, except to other airlines.
About your bolded quote: Kinda hard to justfify paying anyone more money than you make based on that reasoning. After all, you work hard, in the elements, and risk death at work. So far, that philosophy hasn't gained much traction in the USA. For that I'm glad.
You're right - you could work to rule and placard that broken First Class suite. If it really meant that AA didn't sell it to Shanghai (rather than prevent a J -> F upgrade) then your work action cost AA about $13k at list price (round trip, full F). AA sells F to China but usually at some corporate discount - maybe $10k net of that discount. But why would you do that? Don't you want to work for a profitable company? Do you really think someone at AA is gonna say "we can't have all these broken F seats anymore - it's costing us too much revenue. So let's give in to Bob Owens' demands and restore the mechanics' pay according to his CPI chart."
Maybe that would happen.
More likely is that someone at AA is gonna say "let's hire another couple mechanics at LHR and other foreign stations so we can have them fix what those lazy guys at JFK refuse to do. And while we're at it, let's pull a NW and lock these guys out and replace them."
