Bob Owens:
For several years, you have used 2002/2003 as your base years for comparison. In the "Another US red flag" thread you used both of those years in different posts. In one post, you said that in any other industry, an increase of several billion dollars of revenue with tens of thousands fewer employees would be considered a miracle. And it would be a miracle, if those base years (2002 or 2003) were not the industry's darkest years where revenues were nowhere near enough to cover the costs.
Yes, revenue now is several billion more than in those two years, but from late 2001 thru mid-2003, AMR's revenue wasn't enough to cover all of the expenses, so AA borrowed billions of dollars to cover the expenses. Increased fuel expenses really have soaked up the increase in revenues. You can see it by reading the 10-K reports for the past decade.
Better comparisons would be 1997-1999, profitable years where revenue was more than enough to cover costs, and AA was paying out $250 million to $350 million in annual profit sharing to the employees. In those years, fuel costs were just about 10% of total costs while employee compensation was about 33% of total costs.
Despite the painful concessions in 2003, they reduced employee expense by just about $1.7 billion in 2004, the first full year of implementation. Problem was, as WT pointed out, many pilots and FAs continued to move up their wage scale, getting much more each year than the base 1.5% annual increase provided in the 2003 concessions, so the 2003 concession savings largely disappeared by 2010. About half of the 2003 concession savings were from headcount reduction and as you have noted in the past, AA continued to cut jobs from 2004-10, mostly thru attrition. Total labor costs did not shrink, largely due to pilots and FAs continuing to climb their pay scale ladders. After the concessions, fuel expenses exploded. A while back, I added up AMR's fuel expenses for the 120 months following the 5/1/2003 concessions, and the total fuel bill was about $50 billion. At the 2002 fuel prices, AMR's total fuel spending for that period would have been about $20 billion. In those 10 years, fuel costs consumed about $30 billion more, in the aggregate, than they would have at the 2002 prices.
The other airlines were burdened by the same fuel cost problems, and they dealt with it by slashing employee costs much deeper than did AA. US, UA, DL and NW all chopped their wage expense line item farther than AA did with the 2003 concessions.
US employees have not recovered any ground on their bankruptcy wages while some workgroups at DL and UA have made some gains, and in some cases, now exceed AA's wages.
I realize that your W2 wages - the wages of AA's mechanics - lags the industry. But this post is about AA's total wage costs, which have exceeded the wage expense at the competition for many years despite the 2003 AA concessions.
Whose fault is it? There's plenty of blame to go around. AA management's fault. Additionally, those low-wage employees at B6 and VX and NK. And those darn consumers who choose B6 and VX and NK. I'm sure there are other guilty parties as well.
For several years, you have used 2002/2003 as your base years for comparison. In the "Another US red flag" thread you used both of those years in different posts. In one post, you said that in any other industry, an increase of several billion dollars of revenue with tens of thousands fewer employees would be considered a miracle. And it would be a miracle, if those base years (2002 or 2003) were not the industry's darkest years where revenues were nowhere near enough to cover the costs.
Yes, revenue now is several billion more than in those two years, but from late 2001 thru mid-2003, AMR's revenue wasn't enough to cover all of the expenses, so AA borrowed billions of dollars to cover the expenses. Increased fuel expenses really have soaked up the increase in revenues. You can see it by reading the 10-K reports for the past decade.
Better comparisons would be 1997-1999, profitable years where revenue was more than enough to cover costs, and AA was paying out $250 million to $350 million in annual profit sharing to the employees. In those years, fuel costs were just about 10% of total costs while employee compensation was about 33% of total costs.
Despite the painful concessions in 2003, they reduced employee expense by just about $1.7 billion in 2004, the first full year of implementation. Problem was, as WT pointed out, many pilots and FAs continued to move up their wage scale, getting much more each year than the base 1.5% annual increase provided in the 2003 concessions, so the 2003 concession savings largely disappeared by 2010. About half of the 2003 concession savings were from headcount reduction and as you have noted in the past, AA continued to cut jobs from 2004-10, mostly thru attrition. Total labor costs did not shrink, largely due to pilots and FAs continuing to climb their pay scale ladders. After the concessions, fuel expenses exploded. A while back, I added up AMR's fuel expenses for the 120 months following the 5/1/2003 concessions, and the total fuel bill was about $50 billion. At the 2002 fuel prices, AMR's total fuel spending for that period would have been about $20 billion. In those 10 years, fuel costs consumed about $30 billion more, in the aggregate, than they would have at the 2002 prices.
The other airlines were burdened by the same fuel cost problems, and they dealt with it by slashing employee costs much deeper than did AA. US, UA, DL and NW all chopped their wage expense line item farther than AA did with the 2003 concessions.
US employees have not recovered any ground on their bankruptcy wages while some workgroups at DL and UA have made some gains, and in some cases, now exceed AA's wages.
I realize that your W2 wages - the wages of AA's mechanics - lags the industry. But this post is about AA's total wage costs, which have exceeded the wage expense at the competition for many years despite the 2003 AA concessions.
Whose fault is it? There's plenty of blame to go around. AA management's fault. Additionally, those low-wage employees at B6 and VX and NK. And those darn consumers who choose B6 and VX and NK. I'm sure there are other guilty parties as well.
