What''s at stake: American''s future

RV4

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[DIV class=body-head][FONT size=4][SPAN class=headline]What''s at stake: American''s future[/SPAN][BR][/FONT][SPAN class=deck]As American Airlines launches a campaign to cut labor costs, union leaders are skeptical about the company''s strategy.[/SPAN][BR][FONT size=-1][SPAN class=byline]By Trebor Banstetter[/SPAN][/FONT][BR][FONT size=-1][SPAN class=creditline]Star-Telegram Staff Writer[/SPAN][/FONT][BR][/DIV]
[P]Veteran pilot Chris Roberts knows the huge problems facing his employer, American Airlines: billions in losses, unrelenting competition from discount carriers and a looming war that could discourage people from flying.[/P]
[P]Still, Roberts isn''t convinced that he should sacrifice any of his six-figure paycheck or benefits to help the company get back on solid footing.[/P]
[P]From management''s point of view, if they are paying labor a buck, they are paying them a buck too much, said Roberts, an MD-80 captain who has been with American for 13 years. The real problem is mismanagement and the dynamics of the industry itself.[/P]
[P]His stark skepticism reflects the thinking among the leaders of American''s three major unions and reveals a crucial credibility gap that executives must bridge to turn the airline around.[/P]
[P]After trimming $2 billion in operational costs, American Chief Executive Don Carty now says labor costs must be lowered significantly for the airline to become profitable again and compete effectively in a dramatically changing industry. He has asked workers to forgo raises for this year and has said he will request other concessions in the weeks ahead.[/P]
[P]But to succeed, Carty must win the confidence of unionized workers, who have long distrusted management and now have a more serious concern: whether executives can develop a successful plan for steering the airline.[/P]
[P]Jeff Brundage, American''s vice president of employee relations, says structural changes in the airline industry demand a new approach to union contracts.[/P]
[P]We believe we have to restructure every aspect of our business, and clearly our relationship with labor has to be restructured, said Brundage, a former Atlantic Coast Airlines pilot and union officer with the Air Line Pilots Association who joined American three years ago.[/P]
[P]Wall Street analysts who follow the airline industry say lowering labor costs is essential to a rebound at American. This week, after losing money for three quarters at a record-breaking pace, AMR Corp., American''s parent company, will report annual losses for 2002, and they are expected to top $3.5 billion. American''s labor costs are among the industry''s highest.[/P]
[P]Pressure has mounted in recent weeks, as two other airlines have moved to slash costs in bankruptcy court. Union workers at US Airways and United Airlines have had their wages cut significantly. At United, wages will be as much as 30 percent lower, while workers at US Airways have given up more than $1 billion annually in wages and benefits.[/P]
[P]In recent interviews with the Star-Telegram, the executive leading negotiations for American and the heads of each of the unions discussed the airline''s challenges and Carty''s strategy to keep the carrier afloat.[/P]
[P]Brundage said the two sides must break out of an old cycle, which he dubs a rent-controlled mentality: building up costs in good times and then slashing them when the economy goes sour. He envisions labor contracts that provide a permanently lean structure and don''t require downsizing during every downturn.[/P]
[P]He also notes that American doesn''t have a lot of time in which to accomplish its ambitious goal. Clearly, the clock is ticking, he said.[/P]
[P]But union leaders say executives are singing the same old song: When times get tough, they ask workers for givebacks. Although they admit that they don''t have all the answers, they also say they have yet to see innovative strategic thinking from management on issues such as flight scheduling and pricing that could make the company more competitive and raise revenue without draconian cuts in labor costs.[/P]
[P]We don''t see that American has put forward a viable, long-term plan to compete with Southwest, said John Darrah, president of the Allied Pilots Association, which represents 13,500 American pilots. They''re just taking the same old business model they''ve always had and are tweaking around the edges, cutting costs. That''s not going to do the job.[/P]
[P]Jim Little, international vice president of the Transport Workers Union, which represents 37,000 mechanics, baggage handlers, maintenance personnel and other workers, described his union''s members as bitter and skeptical.[/P]
[P]He said that while American executives call for a new era of trust between management and employees, the airline''s lobbyists in Washington are pushing for changes in the federal law that governs airline labor contracts, which would significantly hurt their ability to negotiate contracts favorable to workers.[/P]
[P]It''s not surprising, then, that there''s a tremendous lack of trust in management, he said.[/P]
[P]John Ward, president of the Association of Professional Flight Attendants, said his union''s members have no illusions about the gravity of American''s financial situation and realize that a request for concessions is likely.[/P]
[P]It doesn''t take a rocket scientist to figure out what''s coming, he said. But this is not a simple exercise, and it''s not something we''re going to rush into.[/P]
[P]Although executives have not detailed what they will seek, Carty recently said before a congressional committee that contractual talks with the unions will be well under way by March.[/P]
[P]The upcoming talks hold enormous consequences for North Texas. American is the area''s top employer, with about 28,000 workers locally, so any move to significantly trim wages will ripple through the economy. The airline also controls nearly 70 percent of the passenger traffic at Dallas/Fort Worth Airport.[/P]
[P]Labor strife is nothing new at American or within the airline industry. Several major airlines, most notably Eastern, have gone out of business over the years after battles with recalcitrant unions over costs. American has suffered two strikes and a costly sickout in the past decade, as management and unions grappled over wages and work rules.[/P]
[P]Given the acrimonious history of labor relations at American, it''s going to take a miracle worker to make these two sides trust each other, said Richard Gritta, a finance professor at the University of Portland in Oregon who has studied the airline industry extensively.[/P]
[P][SPAN class=subhead]High stakes[/SPAN][/P]
[P]American, the world''s largest airline, is fighting for a short-term rebound and long-term stability.[/P]
[P]Since the bubble burst on the long-running economic expansion nearly two years ago, the major U.S. airlines have battled intense competition from low-fare carriers like Southwest Airlines, as well as a steep drop in lucrative business travel. They also face continued fallout from the Sept. 11, 2001, terrorist attacks, which involved two American jets.[/P]
[P]After losing $3 billion in the first nine months of 2002, American had about $2.8 billion in cash and short-term investments on hand as of Sept. 30. But analysts said it was burning up to $5 million a day on operations. At that rate, the airline would deplete nearly its entire cushion in 18 months. And a war with Iraq could bring additional losses.[/P]
[P]Last year, Carty set a goal of cutting $4 billion in annual expenses, and he has already slashed about $2 billion. American has worked to simplify its fleet by grounding 83 airplanes. It also cut unprofitable flights and smoothed out schedules at hub airports to save money and improve efficiency.[/P]
[P]The airline has also pushed money-saving technology, like installing automated check-in machines at airports. It consolidated its headquarters staff, which had worked out of 11 locations across North Texas, to American''s two major office buildings in Fort Worth.[/P]
[P]To trim another $2 billion in costs, most analysts agree that the bulk will have to come from employees, both through wages and changes to work rules that govern where, when and how often employees work. Executives believe that if they adjust those rules, employees will be more productive and labor costs will fall.[/P]
[P]Flight attendants and ground workers signed industry-leading contracts in 2001, before the terrorist attacks. Pilots are currently negotiating a new contract. They have been making less than counterparts at United Airlines and Delta Air Lines, although the United pilots recently agreed to pay cuts.[/P]
[P]As is the case at other large airlines, American''s pilots are the highest-paid unionized employees. For example, an MD-80 captain with 13 years of experience, like American pilot Roberts, earns between $150,000 and $155,000 annually, according to the contract.[/P]
[P]Brundage, the executive overseeing labor talks, says this is a unique opportunity to bring labor and management together, working toward the common goal of saving American Airlines. If successful, he said, it could help erase long-standing hard feelings and improve employee relations for years to come.[/P]
[P]Executives have been working to get the message across to employees that labor is a crucial element of American''s recovery plan. Carty has addressed groups of employees across the nation, and he used regular recorded hot line messages to spread the message that American faces a historic challenge.[/P]
[P]Last week, American executives asked unions to hold weekly meetings with management to discuss possible solutions to the financial morass.[/P]
[P]We will be turning up the pressure on ourselves and the union to get this done, he said. When we come out on the other side of this, we are going to be a lean, mean machine and very well positioned to be the first ones to come back.[/P]
[P]He also acknowledges that it won''t be easy. This is a huge challenge, he said. There''s clearly a lot of work to be done.[/P]
[P][SPAN class=subhead]Past promises[/SPAN][/P]
[P]Labor leaders say they have good reason to be suspicious. After all, they worked for years for Bob Crandall, the former American CEO, who was often openly derisive of labor.[/P]
[P]Since he succeeded Crandall in 1998, Carty has made improving labor relations a priority. He told the Star-Telegram soon after becoming CEO that there was a dramatic need to create a better relationship with the unions.[/P]
[P]Still, when executives today talk about labor and management working together, labor leaders say they''ve heard it all before. They also say American executives continue to blame much of their woes on labor costs, rather than on what they see as management missteps, such as the acquisition of bankrupt TWA in 2001 just as the economy was weakening.[/P]
[P]Mechanics and ground workers point to a contract negotiated in the wake of the recession a decade ago, when thousands of workers gave up raises for a three-year period in exchange for promises of job stability. The latter stage of that contract included raises of 2.5 percent to 3 percent every two years.[/P]
[P]Soon after the contract went into effect, the economy began booming and American entered one of the most profitable eras in its history, leaving employees out in the cold, union leaders said.[/P]
[P]The company never came back to us and said, ''Let''s reconsider the wage freeze,'' said Little of the Transport Workers Union.[/P]
[P]Similarly, when flight attendants were negotiating their most recent contract at the tail end of the 1990s boom, they ultimately won a significant raise for employees to make them the industry''s highest-paid. But the process took several years, and the deal came hours before a threatened strike that President Bush had promised to head off.[/P]
[P]The company was in no great hurry to help us to secure wage increases, even though they were making money hand over fist, said Ward of the Association of Professional Flight Attendants, which represents 27,000 flight attendants at American.[/P]
[P]If they give up concessions, What''s to make us think when things turn around they''ll be suddenly willing to share in the spoils? Ward said. They''ve never been willing to do that before.[/P]
[P]American''s Brundage concedes that agreements forged during hard times tend to be poorer than contracts agreed upon when the company is doing well and that management didn''t rush in to amend the terms.[/P]
[P]Contract cycles have not synched with economic conditions, generally, he said. People who contracted during the lulls had pain during the highs.[/P]
[P]But he emphasized that he believes that the current situation is not a typical downturn, and that the industry isn''t likely to return to its late-1990s boom.[/P]
[P]I would put in capital letters, this circumstance is like none other in the history of aviation, Brundage said. You can''t draw any parallels with what went on historically.[/P]
[P]He also points out that contracts with flight attendants and ground workers that were negotiated in early 2001, when the airline was still considered healthy, had the industry''s highest pay levels.[/P]
[P][SPAN class=subhead]Loosening rules[/SPAN][/P]
[P]One of the key issues that needs to be addressed, American executives say, is employee productivity. Executives claim that the complex rules, which are included in labor contracts, put them at a disadvantage compared with low-cost airlines like Southwest.[/P]
[P]For example, American pilots fly on average less than 700 hours a year, according to consulting firm Air Inc. Many Southwest pilots fly at or near the federal limit of 1,000 hours.[/P]
[P]Brundage says that the problem is with the work rules and that the airline wants the pilots to relax restrictions so they can be more productive.[/P]
[P]For example, the pilots'' contract restricts the number of small, cost-efficient regional jets American can deploy. Pilots want the restriction because they fear that airline executives would eventually[/P]
[P][SPAN class=subhead]American Airlines unions[/SPAN][/P]
[P]Allied Pilots Association[/P]
[P]Represents: 13,500 American Airlines pilots[/P]
[P]Top official: John Darrah, president[/P]
[P]Contract status: Four-year contract expired* in 2001,
negotiations for a new agreement are proceeding under the guidance of a federally-appointed mediator.[/P]
[P]Issues: Pilots are paid 20 to 30 percent less than their highest-paid counterparts at other airlines. They want salary increases and guarantees that they won''t be replaced on regional jets by lower-paid pilots at American Eagle. Management wants relaxed work rules to gain more productivity, and the flexibility to deploy more regional jets, It also wants to keep a lid on wage costs.[/P]
[P]Salaries: Range from $24,000 for a first-year probationary pilot to $225,000 for a Boeing 777 captain who has worked for the company 12 years.[/P]
[P]Transport Workers Union[/P]
[P]Represents: 37,000 American Airlines mechanics, baggage handlers, maintenance personnel, meteorologists and other ground-based support staff. The workers are represented under eight separate contracts that cover different employee groups.[/P]
[P]Top official: Jim Little, international vice president[/P]
[P]Contract status: New three-year contracts were signed in 2001 making ground workers and mechanics the highest-paid in the industry. The agreements were negotiated quickly with little acrimony.[/P]
[P]Issues: Management is asking for workers to give up a 3 percent raise that is scheduled to go into effect in March. The airline is likely to seek work rule changes to make employees more productive, and may request salary cuts. Any contract changes must be approved by union members.[/P]
[P]Salaries: Base pay for mechanics ranges from about $35,000 to $64,000 annually.[/P]
[P]Association of Professional Flight Attendants[/P]
[P]Represents: 27,000 American Airlines flight attendants[/P]
[P]Top official: John Ward, president[/P]
[P]Contract status: Signed an industry-leading contract in 2001, which will expire in 2004, making them the top-paid flight attendants in the industry.[/P]
[P]Issues: Airline executives want flight attendants to give up a 3 percent raise that went into effect Jan. 1. Management may also request wage reductions and changes in work rules. Any contract changes must be approved by union members.[/P]
[P]Salaries: Average base pay for flight attendants flying domestic routes is $29,000, and $31,000 for international routes.[/P]
[P]* Under federal law, airline labor contracts do not technically expire. When the duration of the contract ends, they become amendable and new terms are negotiated. The contract provisions remain in force during this negotiation period.[/P][/SPAN][!-- end body-content --][/SPAN]
 

mwa

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Aug 20, 2002
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AMR - negotiating in public again. First get the public sympathy then crush the opposition. Great to have the local paper in your pocket, too!
 
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Normally I would'nt ever mention(in public,here) some of my suggestions, but given the present situation at hand, I'm VERY sure HDQ has already run a "mock drill", on most of "them".
IMHO, the following things should happen.(BEFORE any INITIAL across the board wage concessions are EVEN considered) !!!

1. An offer of an early out !!

2.Starting with the pilots(I swear I'm not single/ing out the APA), the first change has to come with regard to the R/j's. Ideally CRJ-70's that should be flown by APA.

3. Given the nature of the business, the F/A's would pretty much flow along with whatever changes "might" be made by the pilots. (CRJ-70's flown by APFA.)

4. FSC's and AMT's. (with the following exceptions for AMT's, different from FSC's)(AFW,TUL kept open, MCI closed.)

Again, I'm not purposely single/ing any station out, just expressing an opinion. Obviously there are a lot of my regular, fellow posters, in some of the EXCLUDED stations.

Here goes;
EVERY domestic station, with the exception of the following, should be seriously considered to NOT have MAIN LINE jets, landind in them.
(Excluded stations)
BOS-JFK-LGA-EWR-DCA-IAD-MCO-MIA-SJU
ORD-STL-DFW-IAH-AUS(mabey)
DEN-LAS-PHX
LAX-SFO-SEA

Obviously, TWU contract changes would be needed, for this scenario to happen.

It wouldbe very interesting to see how much $$$$$ would be saved under these scenario's

NH/BB's
 

DFWCC

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Aug 19, 2002
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NHBB, I concur on most of your ideas. It has long been said around here that theire will be 10, 12 or 15 mainline stations.
Two problems I see here. Too many jobs lost. Once out almost never back in. About the only new station opened in the last 20yrs has been FLL. Now take time and consider what was closed and if we have ever gotten back the work. Mgnt would like to farm out all FSC work. Then all agents followed by the AMTs. I'm sure they are following Military developments of the pilotless airdrones with much anticipation.
The other main problem, the more we give up the more they want. The loss of jobs and stations will only erode what little bargaining power we have left.
I think some combination of AA-AE united offers a better solution.
 
Aug 20, 2002
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DFWCC,
Yes your right, a LOT of lost AA/TWU jobs(FSC-AMT's), but that's why you and I and others have specific provisions in the contract, for this very purpose.
ex: RIF, station staffing, Station protection etc.
AND,
"the jobs", are not lost to the company(AMR), but to AA.
Believe me DFWCC, "it's the last scenario that I would ever want to see happen
BUT,
it MUST happen BEFORE Carty tries to impose "INITIAL across the board wage cuts on everybody, just so he can keep the "whole show" together.
Again, thats EXACTLY why we have the above mentioned articles in our contract.
As I'm sure you know, Crandall INVISIONED this particular scenario happening, a long time ago.
AND,
we all know(for better or worse) how smart "uncle Bobby" was.

It kind of reminds me of the ol' TV series DALLAS. This is a simple case of "JR" consolidating ALL his stock from say 30 pastures, down to say 12.
It's SIMPLE economics, something ol' JR knew very well. I hope "DC" is watching some old re-runs !!!!!!!!

Regards,
NH/BB's

(Now lets see, hopefully, if I'm bumped out of my present station, the next stop would be "Wide Body City"(JFK),a move thats most imperitive to a "getting older, old fart, like me. I'm spending way to much money on extra strength tylenol
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[BR][BR][BR]
[BLOCKQUOTE][BR][FONT size=1]R.Lee Ermey said it best when he said:[BR][BR]"What is that?!? [STRONG][EM]What[/EM][/STRONG] the [STRONG]****[/STRONG] is that?"[BR][BR]You better wake up Bear.Across the board pay cuts are coming,along with wholesale work rule changes.[BR][BR]And based on the nonsense in that newspaper article and the attitudes I see on this board, they'll be coming in bankruptcy court.[BR][BR]When we get there, the wailing will be loud and protracted.[BR][BR]As employees we should have heeded what has happened at United and US Airways and taken steps to avoid it, but sadly we haven't.[BR][BR]And because of that, we will be joining them in bankruptcy court.[BR][BR][BR][/FONT][/BLOCKQUOTE]
 

flyhigh

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Jan 4, 2003
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NHBB,

They were AA jobs, not TWU....no mechanic works for the union. At most, the union works for you. And thus, the major problem with unions today.

...and no, the CR7's shouldn't go mainline (not APA...mainline...APA doesn't run an airline!). It's too costly. Why are so many people absolutely CLUELESS as to why that doesn't work? How can you justify sending the CR7's to mainline when a competitor is flying it as Comair/ASA? Why would you look to put the company in a position it can't win? Forget the fact that you shouldn't have control over this issue, but that's another story in itself. If APA would take their heads out of their collective rears, they might understand this idea that AA has to be able to compete. When DAL has no scope and you do, you limit the company's ability to turn around.
 
Aug 20, 2002
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JFK(LGA),
Your right about "across the board" cuts, in that Carty can "keep the whole show" pretty much together, and enter "11", without shrinking the company
AND THEN,
have the wages cut in BK. Thats one area where he has total control.

I had'nt quite arrived at AA, when Crandall shrunk the airline, rebuilt it slowly, and turned it into the "killing machine", it use to be.

I just think there are still some area's (like shrinking the company) that "could be" looked at, before, "across the board wage cuts"(IMHO)

Regards,
NH/BB's

ps.
I dont think they are, but you would know for sure, Are they still flying LGA/DAL with those 56 seat f-100's ??
 
B

bagsmasher

Guest
LGA Fleet Service writes:

"And based on the nonsense in that newspaper article and the attitudes I see on this board, they'll be coming in bankruptcy court."


LGA,
We wouldn't have these attitudes if AA would take care of their employees and gain loyalty, like WN does. AA has thought that they could buy their employees loyalty, but they can't. At my station there is little to no loyalty to AA. This TWA fiasco has changed many once loyal employees to ones with anger and apathy towards their employer. AA will see BK court, and yes you are right, the changes they need will not come willingly. AA management should take the blame for that for the "culture" they have created at AA.
 

AA80Driver

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Jan 16, 2003
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[blockquote]
----------------
On 1/21/2003 6:38:55 PM flyhigh wrote:

...and no, the CR7's shouldn't go mainline (not APA...mainline...APA doesn't run an airline!). It's too costly. Why are so many people absolutely CLUELESS as to why that doesn't work? How can you justify sending the CR7's to mainline when a competitor is flying it as Comair/ASA? Why would you look to put the company in a position it can't win? Forget the fact that you shouldn't have control over this issue, but that's another story in itself. If APA would take their heads out of their collective rears, they might understand this idea that AA has to be able to compete. When DAL has no scope and you do, you limit the company's ability to turn around.
----------------
[/blockquote]

The company is not in a position it can't win. APA is using Comair as a benchmark for compensation in negotiations for small jet flying. The rates for the CRJ-70 negotiated in 2000 were comprable with regional rates. That contract extension failed to ratify after the UA pilots got their deal just before the vote. If APA get Comair wages to fly small jets, will they be able to compete with Comair/ASA?.
 

rampguy

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Aug 21, 2002
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[blockquote]
----------------
On 1/21/2003 10:22:37 PM bagsmasher wrote:

LGA Fleet Service writes:

"And based on the nonsense in that newspaper article and the attitudes I see on this board, they'll be coming in bankruptcy court."


LGA,
We wouldn't have these attitudes if AA would take care of their employees and gain loyalty, like WN does. AA has thought that they could buy their employees loyalty, but they can't. At my station there is little to no loyalty to AA. This TWA fiasco has changed many once loyal employees to ones with anger and apathy towards their employer. AA will see BK court, and yes you are right, the changes they need will not come willingly. AA management should take the blame for that for the "culture" they have created at AA.

----------------
[/blockquote]
Bags;
Here you are still crying about TWA while AA is sinking. You need to do 2 things quickly. Grow up and wake up. You've been whining for almost 2 years and it is getting tiresome.

NHBB. Please don't ever forget this point and any union will tell you the same thing. "You can't shrink to profitability". I do have a lot of respect for you but IMO you can give a little now or a lot later. The unions can negotiate it now with some terms of their own or wait until some judge tells you how it's gonna be with no input at all. It is our choice now and no choice later. Think about it.
 
B

bagsmasher

Guest
Grow up & wake up, huh? Carty committed the unforgivable sin when he put TWAer's on the seniority list ahead of his own employees. I am not going to reward him for this. So if this is what you mean by "grow up," it ain't going to happen. This wound will not heal. As far as waking up, wake up to what? The fact that we are going under? I've already woke up to that fact. The major mistake of buying a failed carrier should have woke us all up to that fact.