Who's really on top?

[lineguy43]

No, I said "by doing nearly all it's own maintenance AA is at a disadvantage when comparing to airlines that sub out maintenance since reported contractor maintenance costs don't break out labor expense." You just seized on the disadvantage part and ignored the rest so I had to explain it again.

And that's all I'm going to say on that.

Jim

Yeah too bad Jim that the airlines never tell you that when any airplane comes back from outsouced heavy maintenance it spends almost a week in the hanger working out all the problems. That was my experience almost every time at NWA. See they never want to tell you that..It never fits in their charts and graphs. It is always the bottom line but they never chart that after they get the airplane back. I have seen major problems after I have received airplanes back from a vendor..But it will always be chalked up to a union grevience or swept under the rug....But I am here to tell you it is true. But you pilots wil never know. You will still have contempt for maintenance like you always have. The pilots did get involved in one case at NW when the vendor never reconnected the VOR cables on a DC-9..I was involved in that one as I was the one that found it..

 

[BoeingBoy]

But I am here to tell you it is true. But you pilots wil never know.

Oh, what you say is definitely true - I've heard the stories from US mechanics so you don't need to convince me. The best airline I ever worked for did all it's maintenance in house - you may remember Piedmont Airlines. Of course, that was at a time when even the CEO, who founded the airline, didn't see himself as better than the lowest worker - I'm afraid that part of the olden days are gone.

I'll admit that too many pilots see themselves as above mere mortals like mechanics, rampers, agents, etc, but that's not me. From the new hire lav dumper/agent/res/FA to the highest paid pilot, we're all the same to me - just people largely trying to just do their job and pay their bills.

Jim

 

[Hopeful]

What's available in an easy to read format is yours for free. Just cruise on over to MIT's Airline Data Project. What you seek is under the "Data" tab at the top and then the "Employee Compensation" and "Employee Productivity" tab on the left.

Just keep in mind what my discussion with Bob brought out - it's impossible to accurately compare two airlines because there are too many variables. All that can be done is adjust for size (by using per ASM comparisons).

Jim

I agree. But this topic has turned into a "Labor Expense is all about Aircraft Maintenance" issue.
If this is indeed the reason AA is at a cost disadvantage over other carriers, then why have they not proposed bringing us all up the rates of pay at SWA, Fedex and UPS in exchange for outsourcing?

 

[BoeingBoy]

The short answer, and thus incomplete, is that "labor expense" is more than just pay rates. Size is the easiest to adjust for, but there's productivity/benefits/type of operation/etc that still make a difference. A hub and spoke network carrier will almost always have higher labor expense than a primarily point to point carrier. A carrier with a higher percentage of widebodies in it's fleet will almost always have higher labor expense than a carrier with a lower percentage of widebodies. Plus a host of other issues.

As for the freight carriers, that's another completely different model with much less competition. Back in the 70's I used to work for a small carrier that did some contract flying for FedEx, mainly from Knoxville to Chattanooga to Memphis and back. Every night we'd load 3-5 containers full of those express overnight envelope things that now cost something like $10 or more apiece to ship. We'd probably be carrying $20,000-40,000 worth of those a night to just Chattanooga and Knoxville back then plus the bulkier freight - I can't imagine how much FedEx brings in a night just from those envelope thingies now.

So how do you compare an airline like AA (or any passenger airline) to a company that can make that much money carrying packages? UPS, which just reported a couple of days ago, had revenues of over $12 billion in just the 4th quarter of 2009. For all of 2009 UPS took in over $45 Billion compared to AMR's nearly $20 billion. UPS could afford to pay over half their revenue out (more than AMR had revenue) in compensation/benefits because they still made over $2 billion for the year - in a bad year. When has a passenger airline ever made $2 billion in annual profit without paper "earnings" from writing off pre-bankruptcy obligations when it emerged from bankruptcy?

Jim

 

[Hopeful]

The short answer, and thus incomplete, is that "labor expense" is more than just pay rates. Size is the easiest to adjust for, but there's productivity/benefits/type of operation/etc that still make a difference. A hub and spoke network carrier will almost always have higher labor expense than a primarily point to point carrier. A carrier with a higher percentage of widebodies in it's fleet will almost always have higher labor expense than a carrier with a lower percentage of widebodies. Plus a host of other issues.

Jim

Then the answer is to shrink to profitability.

 

[eolesen]

You guys are so predictable...

Bob takes a quote out of context, spins it into his own agenda.

Jim points out Bob's context mistake, and gives you some fairly reputable facts to back it up.

You guys then pile on the guy who dares point out the selective use of facts, and turn the argument into pilot pay... management expense... anything except the original topic....

The only thing missing is for someone to say MIT got paid by AA to spin their data like something out of a global warming research study....

I've come to the conclusion that the AA forum has become about as useful as a toilet in the hangar men's room.

 

[Hopeful]

You guys are so predictable...

You guys then pile on the guy who dares point out the selective use of facts, and turn the argument into pilot pay... management expense... anything except the original topic....

Is not pilot pay and management pay a component of labor expense?
Is it only aircraft maintenance?

Why are pilots exempt from the "cost" argument? Since Jim and others have posted in detail aircraft maintenance costs, why not compare the pilot contract with other carriers openly on this forum.
Jim gave some detailed numbers in his posts, but yet only posts a website link to compare other parameters avoiding the pilots dirty laundry to be hung out to dry.

 

[eolesen]

Is it not a fact that AA has more mechanics than any other airline?

For the sake of the metric being debated (labor expense), the size of the workgroup compared to the other airlines is going to be a lot more relevant than the actual pay rates.

 

[Hopeful]

Ok, lets try this...
If the fact that AA has the highest labor expense mainly due to performing almost all maintenance work in house, thus requiring the most mechanics of all the airlines, then I ask you....Why has AA not offered to outsource more work in exchange for the wages of SWA and FEDEX and UPS?
Eliminate thousands of mechanics jobs in the process.
After all, AA's first priority is to the shareholder with employees last.

 

[FWAAA]

Ok, lets try this...
If the fact that AA has the highest labor expense mainly due to performing almost all maintenance work in house, thus requiring the most mechanics of all the airlines, then I ask you....Why has AA not offered to outsource more work in exchange for the wages of SWA and FEDEX and UPS?
Eliminate thousands of mechanics jobs in the process.
After all, AA's first priority is to the shareholder with employees last.

I think the answer is obvious. AA likes getting the inhouse quality overhaul from Tulsa and Fort Worth (and now DFW?) at MRO prices. At the current hourly wage, AA's overhaul is fairly competitive with outsourced maintenance. Problem is, at the WN wages Bob Owens thinks everyone should earn, then AA overhaul bases would become just too expensive. In effect, AA's refusal to file Ch 11 in 2003 and jettison the overhaul employees has held down your wages.

My guess is that AA would be willing to raise the wages of the line mechanics (perhaps substantially) in exchange for a continuation of the current wages for the overhaul bases, perhaps with nominal raises (like a percent or two per year).

I know the next verse from some of you: I'm guilty of "dividing" you and "driving a wedge between the line and the bases" but it's merely an observation as to why things are the way they are at AA. None of the other airlines employ thousands of overhaul mechanics at their industry-leading pay rates (or at any rates whatsoever). WN still outsources all heavy airframe overhaul on its 537 737s and thus employs a mere 2,488 maintenance employees. It's pretty easy to pay $45/hr (or whatever WN mechanics earn) when you have half the revenue of AA but only one-fourth the number of mechanics.

 

[Birdman]

Is it not a fact that AA has more mechanics than any other airline?

For the sake of the metric being debated (labor expense), the size of the workgroup compared to the other airlines is going to be a lot more relevant than the actual pay rates.

When Arpey declares on Center for Asia Pacific Aviation, “If you look at the trailing quarters, their (other airlines) operating results can be explained by paying their people less,â€￾ I take it that I personally make more in pay and benefits than any other mechanic in the industry. I do not conclude he means their total labor expense is higher because they have more employees. I believe there are definitive numbers attached to every airlines mechanics in regard to pay and benefits. I only challenge AA managements often quoted assertions that I'm the highest paid in the industry.

 

[lineguy43]

I think the answer is obvious. AA likes getting the inhouse quality overhaul from Tulsa and Fort Worth (and now DFW?) at MRO prices. At the current hourly wage, AA's overhaul is fairly competitive with outsourced maintenance. Problem is, at the WN wages Bob Owens thinks everyone should earn, then AA overhaul bases would become just too expensive. In effect, AA's refusal to file Ch 11 in 2003 and jettison the overhaul employees has held down your wages.

My guess is that AA would be willing to raise the wages of the line mechanics (perhaps substantially) in exchange for a continuation of the current wages for the overhaul bases, perhaps with nominal raises (like a percent or two per year).

I know the next verse from some of you: I'm guilty of "dividing" you and "driving a wedge between the line and the bases" but it's merely an observation as to why things are the way they are at AA. None of the other airlines employ thousands of overhaul mechanics at their industry-leading pay rates (or at any rates whatsoever). WN still outsources all heavy airframe overhaul on its 537 737s and thus employs a mere 2,488 maintenance employees. It's pretty easy to pay $45/hr (or whatever WN mechanics earn) when you have half the revenue of AA but only one-fourth the number of mechanics.

A lot of truth in this statement

 

[lineguy43]

The short answer, and thus incomplete, is that "labor expense" is more than just pay rates. Size is the easiest to adjust for, but there's productivity/benefits/type of operation/etc that still make a difference. A hub and spoke network carrier will almost always have higher labor expense than a primarily point to point carrier. A carrier with a higher percentage of widebodies in it's fleet will almost always have higher labor expense than a carrier with a lower percentage of widebodies. Plus a host of other issues.

As for the freight carriers, that's another completely different model with much less competition. Back in the 70's I used to work for a small carrier that did some contract flying for FedEx, mainly from Knoxville to Chattanooga to Memphis and back. Every night we'd load 3-5 containers full of those express overnight envelope things that now cost something like $10 or more apiece to ship. We'd probably be carrying $20,000-40,000 worth of those a night to just Chattanooga and Knoxville back then plus the bulkier freight - I can't imagine how much FedEx brings in a night just from those envelope thingies now.

So how do you compare an airline like AA (or any passenger airline) to a company that can make that much money carrying packages? UPS, which just reported a couple of days ago, had revenues of over $12 billion in just the 4th quarter of 2009. For all of 2009 UPS took in over $45 Billion compared to AMR's nearly $20 billion. UPS could afford to pay over half their revenue out (more than AMR had revenue) in compensation/benefits because they still made over $2 billion for the year - in a bad year. When has a passenger airline ever made $2 billion in annual profit without paper "earnings" from writing off pre-bankruptcy obligations when it emerged from bankruptcy?

Jim

Yep that is why even with all my venom directed at NW they actually did me a favor..I now work for FedEx making a better salary with much more stability that I ever had at brand X.. So I guess instead of being angry at NW I really should thank them.....

 

[BoeingBoy]

When Arpey declares on Center for Asia Pacific Aviation, “If you look at the trailing quarters, their (other airlines) operating results can be explained by paying their people less,â€￾

"Paying their people" is a non-specific expression in accounting. First, from and company's perspective "pay" includes all compensation since vacation/sick time/pension/etc are components of the cost of having an employee on the payroll. Second, "people" can be a plural term meaning the cost of all employees rather than an individual's pay check.

Having said all that, I'll repeat that comparisons between airlines is a non-exact science since there are too many differences between airlines that aren't factored out.

Jim

 

[BoeingBoy]

Jim gave some detailed numbers in his posts, but yet only posts a website link to compare other parameters avoiding the pilots dirty laundry to be hung out to dry.

I'll take you to task for that - to respond to one post I took the time to look up the numbers then explain some of the reasons those numbers could be used to give an impression contrary to reality. But I'm not the AA employee's reference desk and have no responsibility to go scurrying for info when you or anyone else snaps your fingers. When you asked about the pilots I gave you the link to the data so you could look at all the data yourself. If you're too lazy to do that, don't scold me for not doing it for you.

Jim