the 50 hour ordeal

FA Mikey

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Aug 19, 2002
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goldwatermiller08.com
The ordeal that saved American Airlines
04/26/2003

By ERIC TORBENSON / The Dallas Morning News

Donald Carty knew he couldn’t save his job.

But in a nail-biting meeting Wednesday with American Airlines union leaders, the AMR Corp. chairman believed he could still save his airline.

Mr. Carty would be off the AMR payroll in just hours, but the topic “was an elephant in that room that no one brought up,â€￾ said John Darrah, president of the Allied Pilots Association.

“I saw more leadership in those 12 hours from Mr. Carty than I had seen from him in the last two years,â€￾ Mr. Darrah said.

The daylong union-management showdown began a 50-hour odyssey at the world’s largest airline, with the clock ticking toward bankruptcy for the fourth time in four weeks.

http://www.dallasnews.com/sharedcontent/da....13b90f2bf.html
 
The only leadership Carty showed was in the last 2 minutes when he said "I resign."

This is a man who took a profitable airline to, what will be, ultimately bankruptsy. This is a man who made collisal mistakes like paying a billion dollars for a decrepit airline when capacity demand was plumetting and all the economic indicators were pointed in the wrong direction. This is a man continued on with a failed business plan when it was obvious to all that it was dead. This is a man who was busy enriching himself and his indispensible (read that "FAILED") management team under the table, all the while telling employees that he had to put 25% of them out-of-work and for the other 75& to make huge compensation sacrifices.

I read John Darrah''s letter to his union members in it''s entirety and almost threw up.
 
This was a man who made many promises to TWA employees. He let APFA bargain $190 million of the $360 million in concessions onto the back of TWA employees. All furloughed, no furlough pay, no medical, no passes.
 
Winglet,

Seriously, until you can think at a level that is above the microcosmic world in which you work, you shouldn''t criticize those who can. I keep hearing the same blabber from so many on this board...it''s Carty''s fault we''re loosing money. It was a bad choice to buy TWA. Blah, blah, blah.

Who could make American Airlines profitable? What individual would have made it profitable? You? Your union leader? God? The answer to all of those questions is ''no''! It is not possible for AA to turn into Southwest or JetBlue overnight. They couldn''t change over 10 years either. This business is not able to change at that pace.

As for buying TWA...probably one of the better moves. Pay $1 billion for $3.3 billion in revenue. Reduced the capacity (through bankruptcy) pretty quickly. Extended the network capabilities overnight. Add to that, gave AA a great chance to virtually add capacity in ORD without actually doing so. What Carty had to do was a truly sad day for a capatilistic society. To have to resign for giving a solid mgmt team some reason to stay...ridiculous. And let be completely clear on this...each union was allowed to see the books. Each union was completely aware of the pension plans and bonuses. This pretty much hits exactly to the way a union can win. Each union had taken serious heat on their tentative agreements. By letting this be a point of contention, it allowed employees to focus on the bonuses instead of their perceived failure of the union leaders. Once the smoke cleared, they found it in their hearts to sign the already approved agreements.

The pension and bonus flap is the same exact issue that Delta had two weeks ago. What''s the difference? AA is close to bankruptcy and signing concessionary aggreements. Delta isn''t. For Delta, nobody had a power position to play from.
 
Trouble is, Flyhigh, that the blah, blah, blah, it part of what put this company on the skids. Antiquated business plan and STILL NONE, failure to forsee and adapt to the market, buying capacity when it wasn't needed, and the list goes on and on. Take your pencil and figure out how many TWA airplanes are GONE and are going to GO. STL is one of the poorest performing hubs. They've also enjoyed a 30% discount on pilot labor over Delta by slow rolling the pilot contract for almost 2 years. Even after they gut labor contracts, their CSM is still WAY high. When the market fundamentally changed two years ago, this management team failed to act, then 9/11 gave them the sunday punch.

The crowning glory was the stupid debacle on the bonuses and pensions. They couldn't even foresee and get the PR right. What did they THINK was going to happen when that came out in the press? And, even IF the union leaderships were told about the executive windfalls, they couldn't tell the membership because of the secrecy agreements agreed to.

What YOU want is management with all the perks and none of the RESPONSIBILITY for failure. In my background, the boss is responsible and gets credit for the good stuff as well as his failures . . . . and this management team has clearly failed. But then, they have a lot of company . . . like Goodwin, Wolf & Gangwall, et al.

If you what American's business plan is, I'd like to know.
 
ah...the true arguement of the uninformed. When you don''t know better create a whole and run through it...yeah, it''s the blah, blah, blah. That''s it.

Lack of business plan...is it really a lack of a business plan or one that you don''t like? Let''s look at what AA is doing.
1) Labor costs - Having an advantage over Delta means nothing...Delta lost $466 million...yes it''s less than AA''s $1B Q1 performance, but worse than Southwest, JetBlue, and AirTran. They made money. Compare AA to them. And just to let all of you know, when you look at labor costs, look at them by group. I think you''ll find that unlike line employees (pilots, mechanics, flight attendants, etc.) mgmt employees make less than they could elsewhere and they do leave. In most cases, VP''s at airlines are paid less than the pilots. Absolutely ridiculous! The bonuses are meant to bring them to a level that keeps them from leaving to better pay and easier jobs. You don;t like this part of the plan because it means you''ll make less. That makes sense, but AA is not in business for your benefit. They''re around to make money.

2)Fly profitably. Sonetimes that means that you need to use an RJ, sometimes a mainline jet. Because of the rising costs of labor, it often times nowadays makes sense to fly an RJ. You may not like that, but it''s true. Nobody sits around at hq looking for ways to screw employees. I hate to tell you, but it just doesn''t happen. They''re really just looking to make the most money.

3) Gain market share...AA made a great push on United in ORD when AA brought capacity back in Chicago before United. A lot of that was based on the premise that most economists agreed would occur....the US economy would start to rebound around the 2nd qtr of of 2002. That didn''t happen and most carriers have now pulled back as a result. Now, keep in mind that significant capacity changes are hard to make happen. Lease agreements simply don''t allow you to stop paying. As a result it is often time better to continue to fly the plane to provide system contribution than to ground it, continue paying on it, and raise overall CASM as a result. Plus, the crew costs and such are not removed easily. Those only leave if you can plan 6 months ahead (approx).

3) Reduce fleet types...the DC-10, MD-11, 727, and soon the Fokker fleets are gone. Keeping in mind point 2''s comments that you can''t just ground planes tomorrow, you''ll note that AA has removed 4 fleet types in a pretty short amount of time. Add to that, the entire TWA 717 fleet, and if I recall correctly, there are plans to remove the 757 & 767 fleets of TWA soon if not already. As for their M80''s, many of those have now replaced 757 sevice TWA once flew. STL hub capacity is down dramatically. As for its performance, well I can''t trully speak to it, but I have heard that while yld performance is lower, that was expected. Margin for the hub, however, is not as poor as you''d like to think. Keep in mind that the cost of the hub is quite low and that because it''s operating performce is the best in AA''s system, it keeps itself in good shape for a run down old place.

Don Carty, nor any exec in this business foresaw how bad the economy would get. Nobody could predict terrorists would use AA & United specifically. Nobody could predict the A-300 accident. Even though a weak economy was getting into gear, you should keep in mind that until just a couple months ago, consumer spending remained VERY strong. While corporate travel was and remains down and will most likely not come back to previous levels, people continued to spend. To think that AA is now not profitable because of Don Carty simply shows you lack the understanding of this business. Did you realize that airlines have not made a cummulative profit since 1903 when Wilbur and Orville first flew? Did you know that once in the entire history of aviation has any major airline ever covered the cost of capital (that would be Southwest for one qtr...even they perform poorly compared to other industries)? This is important stuff...we''re not a public utility. They are in business to make money. To do so requires doing the things above AND cutting capacity (which is happening), AND cutting people, and all sorts of things that AA has done to remove $2 billion in costs BEFORE they asked for labor cuts.
 
Winglet,
You keep knocking the STL hub without valid reason. The STL hub routinely finishes at or near the top for on time performance. We have been told by management that none of the hubs are doing well but it does better than some although it may not be the best. My god man, its been well over 2 years and you''re still harping on the decision to buy TWA. In case you are unaware, its done, its purchased and the value will eventually be there as will the value at DFW, ORD and MIA. I would have been happy working for TWA for my entire career but that was not to be. I am one of the lucky ones in this industry...I have a job. A lot of coworkers aren''t so lucky. You guys got your wish, Carty''s gone. I get the impression from some of you that God himself could become CEO and simply for that fact everything he did would be wrong. The Us versus Them mentality serves no purpose other than to divide the workforce. At TWA, we had a time where we had a revolving door at the top and that was not good for the company. As for the pension deal. It was much ado about nothing. Was it handled poorly? Absolutely. Was it worth Carty being forced out? Not in my opinion. We are in different times right now. It ain''t going back to the way it was no matter how much we would like it to. Start working together and do your best. No job is secure and the bickering helps no one.
 
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On 4/27/2003 10:54:36 PM Winglet wrote:

Oh, and too, the pilots that I know at JB are very happy and don''t see the need to unionize, not even in the long term. They have confidence and admire their CEO. Why is AA different? It all goes back to the basic truism that companies that have lousy labor relations usually have lousy management. I am getting very worried that I will not retire from AA, but rather, it will be another uniform in the closet.

Convince me I''m wrong.

----------------​

That would be difficult to do, since logic doesn''t seem to work.

You want to know where the bad labor relations at AA come from? They come from the older guys telling the younger guys that management is going to screw them. You get told something enough times, you begin to believe it. It''s why advertising works. Bad labor relations get perpetuated over the years, and no matter how good things get, the only message you get is "Screw the management because that''s what they will do to you."

If JB is here in twenty or thirty years, I''ll bet they will be having problems too. Even with the best labor relations in th country, you are beginning to hear rumbles of trouble at SWA already (the F/A''s).

It''s a consequence of the system.

TANSTAAFL
 
I see lots of standard REACTION, like cutting capacity, but no strategic planning, direction, or leadership. Carty himself said they knew in late 2001 the business traveller was going away and wasn''t going to pay the kind of premium that AA demanded. Recently he''s been saying that price is "king." But then in the next breath he says the public is willing to pay a 30% premium to ride on AA, which they aren''t.

Consumer spending real strong? Is that why we have a 70% load factor? We have to reduce capacity huh? I guess that''s why we bought TWA?

As far as your valuable VPs making less than pilots? OK, post the salaries of the and full compensation packages (including bonuses, protected pensions, severence bonuses, etc) and we''ll see. APA pay scales are published in the contract and I''d be really, really surprised if a VP makes what I do.

The problem is that I don''t see any change in strategic direction with this company. We cannot continue to lose this kind of money and still be here a year from now. The economy is NOT going to recover and even when it does the high paying customer, which AA relied upon for the cream of it''s revenue is gone. Compared to JetBlue and, no doubt, others that will pop up, AA''s product doesn''t compare favorably. Talk to people that fly on JB and you will hear glowing reviews (I myself have not flown on JB so I can''t comment myself). That is the perception of the customer.

Oh, and too, the pilots that I know at JB are very happy and don''t see the need to unionize, not even in the long term. They have confidence and admire their CEO. Why is AA different? It all goes back to the basic truism that companies that have lousy labor relations usually have lousy management. I am getting very worried that I will not retire from AA, but rather, it will be another uniform in the closet.

Convince me I''m wrong.
 
----------------
On 4/27/2003 11:07:15 PM WXGuesser wrote:

----------------
On 4/27/2003 10:54:36 PM Winglet wrote:

Oh, and too, the pilots that I know at JB are very happy and don''t see the need to unionize, not even in the long term. They have confidence and admire their CEO. Why is AA different? It all goes back to the basic truism that companies that have lousy labor relations usually have lousy management. I am getting very worried that I will not retire from AA, but rather, it will be another uniform in the closet.

Convince me I''m wrong.

----------------​

That would be difficult to do, since logic doesn''t seem to work.

You want to know where the bad labor relations at AA come from? They come from the older guys telling the younger guys that management is going to screw them. You get told something enough times, you begin to believe it. It''s why advertising works. Bad labor relations get perpetuated over the years, and no matter how good things get, the only message you get is "Screw the management because that''s what they will do to you."

If JB is here in twenty or thirty years, I''ll bet they will be having problems too. Even with the best labor relations in th country, you are beginning to hear rumbles of trouble at SWA already (the F/A''s).

It''s a consequence of the system.

TANSTAAFL

----------------​



Bingo
 
"Having an advantage over Delta means nothing...Delta lost $466 million...yes it's less than AA's $1B Q1 performance"

Let's see, Delta pays their pilots 30% more than AA and their management team lost less than HALF what our management team did. Means nothing, huh? Then I guess is doesn't matter what we pay our people.
____________________

"Because of the rising costs of labor, it often times nowadays makes sense to fly an RJ."

Rising cost of labor? Hummm . . . . Seems to me that for the pilot's, at least, that AA has been enjoying a 1996 contract compensation by slow-rolling the new contract talks for 2 years past it's end date. And, the 1997 AE ALPA contract is about the sweetest labor contract management could hope for.

As far as RJ's go, yes, it does, sometimes. And the CSM on an RJ is pretty high. Carty has always been able to fly as many RJs as he wants, but it was AA pilots that had to do the flying due to the scope provisions that Carty agreed to.

I will hand Carty one thing. He has abided by the 1996 contract (more or less) and not used the force majuere provisions abusively. Whether that's good will on his part or just on the advice of what's legally defendable, only he knows.
_______________________

"Add to that, the entire TWA 717 fleet, and if I recall correctly, there are plans to remove the 757 & 767 fleets of TWA soon if not already. As for their M80's, many of those have now replaced 757 sevice TWA once flew. STL hub capacity is down dramatically."

Yep, sure am glad we bought TWA and got all those great (dead) route authorities and incompatible aircraft.

717s - Great airplane. Much better than the acoustic torture chamber,
unsupportable white elephant F-100s that AA management bought. But,
unfortunately, GONE
767s - Incompatible engines. GONE
757s - Incompatible engines. Will expect they will be GONE as soon as BK
filed. They'd probably be gone now if the company could return them
to the leasors without Chapter 11.
MD80s - Require expensive modifications. Some already GONE. Many more to go
if BK filed.
___________________________

"To think that AA is now not profitable because of Don Carty simply shows you lack the understanding of this business. Did you realize that airlines have not made a cummulative profit since 1903 when Wilbur and Orville first flew? Did you know that once in the entire history of aviation has any major airline ever covered the cost of capital (that would be Southwest for one qtr...even they perform poorly compared to other industries)? This is important stuff...we're not a public utility. They are in business to make money. To do so requires doing the things above AND cutting capacity (which is happening), AND cutting people, and all sorts of things that AA has done to remove $2 billion in costs BEFORE they asked for labor cuts."


Soooo . . . then it doesn't make any difference who's at the controls of the corporation if it's pre-ordained that we're going to lose. Funny, jetBlue and Southwest are turning a profit. Again, sure am glad we bought all that capacity with TWA so we could CUT IT. As for the so-called $2 Billion in non-labor costs . . . . the company has already said most of that savings is in the out-years. Slashing employees and employee compensation is what is going to save right now. Even if all the pilots worked for FREE, we'd still be losing money.

Well, even after all that, you still haven't told me what the business plan is. A business plan isn't cutting capacity, cutting costs, and giving fat bonues to management. The first two, at least, are survival measures while your new business plan is being implemented.

A business plan is knowing who your customer is, what he/she's willing to pay, where they want to go, and what kind of amenities they want. So far, I haven't heard of a new plan from management, other than crossing fingers and hoping against hope that the a miracle happens and the economy comes roaring back with the high paying business customer. That ain't gonna happen. The jetBlue's, Southwest's, AirTran's, Frontier's, and ATA's are going to steal the lucrative routes from the majors with better service, and in the case of jetBlue, better aircraft and service. AA traditional competition model of deep-pocket competition is not going to work anymore because there aren't any more deep pockets.

Judging from the recent TA. I would guess that the general direction (I wouldn't call it a strategic plan, however) is to effectively eliminating scope, finish breaking the unions with legistation to outlaw the traditional right to self-help, and the migrate domestic flying to low compensation commuter style contracts.

Unfortunately, even with the recent draconian TA's at AA (as well as UAL), I just don't see how BK is anything but inevitable. AA CASM is still WAY high and will continue to be so. The economy is going to continue to be poor, business travel is going to continue to be poor and migrate to the jetBlues in ever increasing numbers.

For the reasons above, I remain pessimistic because AA management has not given me any reason to think otherwise.
 
Flyhigh wrote:
"In most cases, VP''s at airlines are paid less than the pilots."

Check out this link with info from AMRs 10-k filing. It concerns a unbelievably lucrative severance package for one of Flyhigh''s underpaid VP''s:

www.aviationplanning.com

Click on Hot Flash AA Exec Plan

It''s so over the top that I''d say it was another internet hoax, but it seems to come from a reliable source.