Posted on 02/04/2003 3:09:26 PM PST by MadIvan
FORT WORTH, Texas, Feb. 4 (UPI) -- American Airlines Tuesday asked its union leaders and workers to agree to $1.8 billion in cost cuts from wages, benefits and work rule changes in the face of continuing losses at the world's largest airline.
AMR, American's parent company, lost $3.5 billion last year and $1.8 billion in 2001.
Union leaders received letters from AMR Chairman and Chief Executive Officer Don Carty and President Gerard Arpey requesting the cost-cutting moves. Details were released after a meeting of the two sides Tuesday.
American executives have said the company needs an estimated $4 billion in permanent annual savings to compete effectively and return to profitability. The Fort Worth, Texas-based airline is trying to avoid following United Airlines and US Airways into bankruptcy.
"We have together made significant changes in our operation, our product and our service to build a more efficient and innovative airline," the company said in letters.
"But we need to do more. And we need to do it now. Our financial results make it abundantly clear that American's future cannot be assured until ways are found to significantly lower our labor and other costs."
Unlike other financially troubled airlines, American states it has turned to employees as "a last resort," and only after pursuing an aggressive restructuring plan that identified $2 billion in annual, structural cost savings.
American cited pricing actions by low-cost and bankrupt carriers among the factors putting "unrelenting pressure" on the company's financial situation.
"Today, as a last resort, we are taking the difficult step of asking all of our employees to participate in American's recovery by working with us to deliver $1.8 billion in permanent, steady-state savings," the executive stated. "We hope to work collaboratively with you to restructure labor agreements to realize these permanent, annual savings and those needed to address our long-term financial health."
American said it would also seek cost adjustments from a number of its other stakeholders, including aircraft lessors, lenders and suppliers.
The company also announced plans to close two of its 10 domestic reservations offices -- Norfolk, Va., and Las Vegas -- impacting approximately 910 reservations representative positions.
In the meeting, Carty and Arpey said they assured union leaders that management would continue to do its share. They said there would be a second year of across-the-board pay freezes for management and a 22 percent reduction in management and support staff positions.
Regards, Ivan
And if they say no? Hey, they can always go to work at Walmart.
No need to ponder the matter. Read the financial statements of airlines and do a little more sleuthing and you'll learn what is dragging the major airlines down while the low-cost airlines are thriving:
- Salaries: Captains flying the latest aircraft with lots of seniority earn $200-250 K per year. The aircraft are nearly 100% automated, and they spend much of their time reading novels while in the cockpit. Does this make sense?
- Pension: My 46-year old friend is an AA captain and he is expecting to receive upon retirement a pension of $4 million. Yes, $4 million. He has not been contributing this himself, but the airline has. One of the airline's biggest concerns is their financial ability to meet their pension obligations. I read recently that USAir's pension liability is $4 billion, equal to more than their debt! Pilots have one heckuva union!
- Frequent Fliers: yes, our beloved free travel is one other major liability for airlines.
The fact that other airlines are solvent while the majors aren't is not magic. It's well known.
Pilot Freepers, no offense is intended but flame away anyway if I've angered you. Asbestos suit on ...
Your comment which belittled the level of skill, judgement and responsibilty required of pilots flying highly automated but extremely complex modern airliners reveals such a high state of ignorance about the flying profession that a rebuttal on my part would be an utter waste of time.
There is no pilot at AA or any other airline with a pension valued at $4 million. Many pilots at other carriers have lost nearly their entire pensions. Only senior management receives perks like that. I might add that over the last two years, financially the worst ever in the history of AA, its CEO received two incentive bonuses totalling 750,000 shares, in addition to his other forms of compensation. A sensible person might wonder at what point does a company, perhaps well on its way to bankruptcy, terminate such rewards.
As for your reply, you sound like you are a pilot so I will not try and debate you. But I do believe that:
- $250 K is the salary of a company president, not a very skilled person like a pilot. If you disagree violently, so be it. But the pilot is running a machine, albeit a very sophisticated one, and is not running a company.
- $4 million is the amount that a personal friend of mine says he will have in his pension when he retires. So, maybe he's a lucky one or was grandfathered in under a different type of contract. He can't be lying -- he is making serious financial decisions based on his estimate of his pension. He's 46 and has lots of seniority -- wasn't in the military, and probably began flying for AA in his late 20s.
- I didn't belittle the skill, judgment, or responsibilities of pilots. I just don't think that the job should be paying $200-250 K. [I also don't think doctors should be earning $250 K, by the way.] And, it is one of my pilot friends that says he gets more rest in the cockpit than he does at home. If you disagree violently, just tell us what actually happens in the cockpit.
- As for the overpaid CEOs, well, don't assume that because I think pilots are overpaid, I also believe that CEOs are underpaid. But overpaid executives do not make companies unprofitable -- as furious as you might legitimately feel about their salary. But if 10,000 pilots are overpaid by $50,000 - $100,000, plus a large pension contribution of $20-25 K/year, now we're talking about real money in the $1 billion range.
And last, don't get me wrong. I don't blame anyone for trying to maximize their income as long as it's done honestly and with principle. But the original question was why the major airlines are losing so much money. And I do happen to have the general sentiment that pilots (and doctors, and lawyers, and CEOs) are paid too much.
As a firm supportor of capitolism, I have little sympathy for socialists.
I doubt a single fighter,bomber,tanker, or transport jock in the USAF pulls down 250K a year.
That commercial pilots make more money than my beloved USAF flyboys, makes little difference to me.Their comparative wages have no relevance to each other.
That said, the whining of unionised commercial pilots regarding changes in pay structures in a market driven economy is ridiculous!
I am not entirely anti-union.I see a need for organised labor in lower skilled occupations, which consistently display unethical practices by unethical employers ie farm laborers,textile workers,certain construction jobs etc.
It's probably just my own sarcastic personality, but since lots of people seem to think I am "poor" while I am grossing 32K a year on a 40 hour work week,I have to laugh at people who think they are being cheated by the free market economy,if they earn less than 100K.
I am a citizen of the USA.Absolutely nothing stands in my way of creating monetary wealth, but my own free choices of exerting my talents, effort, will and personal priorities.
My pursuit of happiness is my individual right, and I exercise it every day of my life, in a way that differs from Bill Gates, George Bush,Madonna, and Michael Jordon.None of the above are inherently better than myself,they just freely pursue their own happiness, in ways other than mine.I do not envy them.I am free, and I freely choose my own path to happiness.
If this captain should make a minor error in the performance of his duties that results in damages but no fatalities, perhaps it will cost his company only a few million dollars, and for him his career. A fatal accident with its resulting legal liabilities can conceivably put the entire company out of business, and cost him his own life. Allow me to let you in on a little secret-- in the normal course of events, many decisions are made on every flight that could have an impact on safety. You as a passenger are simply never aware of them, unless the situation becomes so critical that an announcement is made; "ladies and gentlemen, we have weather and are diverting to-", or "we have a mechanical problem and are returning to-", etc. In many instances when problems arise events quickly develope a snowballing effect that if improperly handled will rapidly task-saturate the pilots into a tragedy. Sometimes there is no clear-cut course of action to follow, and since you simply cannot pull over to the curb and stop, you must trust your judgement and experience, and hope for the best.
I'll not go into all the years of training and retraining it takes to make the captain we are talking about, except to say that he's gone to school longer than many medical doctors. And he is stringently retested for job proficiency at very frequent intervals throughout his career. He must also pass demanding physical examinations every six months. The smallest health problem that would not affect careers in 99% of occupations will cost him his. And finally, he must by federal law retire at age 60.
How much should a person with this sort of responsibilty and accountability be paid? What kind of pilot quality would the industry eventually wind up with if this captain was paid say, $50,000? What kind of surgeon would you get for your open-heart bypass?
Pilots are made up of many types of individuals. Some are swaggy, braggart types who enjoy making light of their work to impress others with "coolness". Your friend who claims to read novels while flying may fall into this category, but if he is telling the truth he is in gross violation of his duties as pilot-in-command and I hope one of his first officers turns him in to Professional Standards. His pension fund is largely based on the market and is worth less now than it was four years ago, and this includes continuing monthy contributions made over the 4 year period. I'll say again, no pilot has walked with anything near $4M. He's dreaming.
I object to CEO's being awarded bonuses at a failing company, while simultaneously asking employees for paycuts and other concessions. It must be my military background, where officers were expected to lead by example (those who did not quickly lost the respect of their men). And I especially object to bonuses being paid to marginal CEO's at failing companies where they themselves have made many grevious and costly mistakes, and whose policies have contributed to the ensuing misfortune.
This country is mine, on every level measured by anyone.
My ancestors on my maternal side were Sioux.
On my paternal side, they were European.
My parents met and married during the Korean war.They were both active duty US military in Greenland at the time.
My mother wore combat boots, and my white Aunts hated her.My red uncles hated her for marrying a white man.
I have no patience for those who pretend to "play the race card" or attempt to use ancestry as a sword against USA citizenship.
I also wore combat boots for a time.I welcome any who come to join the USA.My boots are still in my closet, and I will not hesitate to use them on those who come MY land and attempt to steal what my blood has paid dearly for.
- Proper and safe operation
- Proper procedures and decisions during emergencies
- Untold numbers of regulations
- Extraordinary legal liabilities and risk
- Extensive training
Pilots are not the only ones with such in their job description. How about nuclear reactor operators? How about the director of the Yucca Mountain Nuclear Waste Repository? How about the head of FEMA (Federal Emergency Management Agency)? How about the civilians with senior roles in Homeland Security? Yet they don't earn $250 K and are not expecting pension payouts at age 60 of greater than several million $$. You risk insulting them if you imply that they don't REALLY care about their job because they are not paid as much as an airline captain. And you are patronizing to them to imply that a commercial aviation pilot has a more important role in American society than they.
Please stop taking this personally. I work in the defense industry and have been accused of being a baby killer. My opinions do not mean that I think your job is dishonorable or that you are not a high-integrity, upright man just doing his job.
Perhaps it is you who is taking this too personally. From the tone of some of your previous remarks, it is clear that you feel only senior management is worthy of the higher salaries in our economy.
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