AA Plans

[alek]

-Delta responds to slow economy by: RJs, and hopeffully, by buying 100 seat a/c for DeltaExpress operation.

-UAL attacking AA in Chicago by increase of RJs and claims to have the most departures and arrivals in ORD.

-USAirways decided again somehow to team up with UAL and increase number of RJs to 400 and only have 270 a/c on the mainline side, also, major reduction of flying out of PHL.

-SWA is getting ready for its major expansion and increase of market share in 2003, like they did when economy was down in 1992.

-CAL and NWA increase flights and market share by addition of RJs.

My question is how does AA plans to keep its market share? With the ASM cap between AA and AE I don't see how can they do it. Also, I don't know what is the total number of AE SJs on order, but I am sure it is less compare to other Majors and their Regionals.

Thanks for all of your comments infront.

 

[pb4ufly]

American Airlines Sees Job Cuts

CHICAGO (Reuters) - American Airlines will cut more jobs to compete with Southwest Airlines and smaller no-frills competitors, acknowledging cost-conscious consumers are forcing changes in the way the world's largest airline does business.

Citing fewer business travelers and cheaper fares, Chief Executive Donald Carty said job cuts will unfold as the AMR Corp. unit (NYSE:AMR - News) tries to figure out what travelers want and how much they will to pay to fly.

Carty gave no numbers or timetable. AMR shares fell by nearly 6 percent on Wednesday before rebounding somewhat as the airline sector took a beating.

After a big runup late last year, the American Stock Exchange airline index (AMEX:^XAL - News) on Wednesday fell below its levels posted immediately after the Sept. 11 attacks, trading down 2.25 percent to 61.18.

AMR, based in Dallas/Fort Worth, is also parent of TWA and American Eagle. The company posted a total net loss of $1.79 billion in the three quarters since the Sept. 11 attacks slashed demand for travel, particularly on the business side.

"Over time, we'll need fewer people to operate the airline," Carty said this week in a taped phone message to employees. He said the message was the first in a series that will outline possible changes.

AMR cut capacity by about 20 percent after the Sept. 11 attacks and also laid off about 20,000 workers. As of March, AMR had 123,732 employees.

"Today, we have a lot of people traveling, but on fares that simply don't provide the level of revenue we became accustomed to during the economic boom years," Carty said.

The condition of big carriers like American is not going to suddenly improve when the economy gets better, he said.

AMR shares closed Tuesday at $14.91, the lowest price since December 1987. Most airline shares are close to post-Sept. 11 lows, when some carriers hovered near bankruptcy until the government passed a landmark bailout package.

DANCING NEAR THE DOLDRUMS

AMR shares dropped further Wednesday on the New York Stock Exchange, falling 5.7 percent to a new low of $14.05 before paring losses to $14.60, down 2.1 percent, in the afternoon.

The nation's top carriers posted $7 billion in losses last year, with only low-cost No. 7 Southwest Airlines (NYSE:LUV - News), American's rival based in Dallas, consistently earning money as travel remains below year-ago levels.

American now competes with low-cost, no-frills carriers in 70 percent of its markets, Carty said.

Southwest has an average cost per available seat mile far below that of rivals, helping it stay in the black as bigger airlines posted record shortfalls.

Both No. 2 carrier UAL Corp. (NYSE:UAL - News), parent of United Airlines, and No. 6 US Airways Group Inc. (NYSE:U - News) have asked the federal government to back private-sector loans, as has No. 10 ATA . Part of that process means they need big wage concessions from union workers.

Even Southwest's executives say any industry recovery will be very slow. Southwest is also beginning to experience some labor issues -- mechanics this week asked for a mediator to step in to help negotiate a contract.

THE WAL-MART FACTOR

"Just as Wal-Mart (Stores Inc.) (NYSE:WMT - News) has become the No. 1 retailer in the United States and lots of well-known retail names fell by the wayside, consumers are telling big airlines they really really like us but they can't or won't pay extra for the convenience and amenities that we offer," Carty said.

American won't go Wal-Mart, however. "There are elements of our full-service airline that have tremendous value," he said.

Job cuts will be made mostly through attrition, turnover and retirements, Carty said, but some involuntary programs may be needed.

"Those cases where involuntary job losses result -- and until we're through this whole process we can't say if or when that will happen -- we will be guided by principles of fairness and decency as we help people make those transitions."

Jamie Baker, airline analyst at JP Morgan Securities, on Tuesday widened his second-quarter loss estimate for AMR to $3.20 per share from a previously estimated loss of $2.50. He cited continued sluggish revenue recovery and worse-than-expected June traffic data released Tuesday.

 

[Jolly Roger]

...I was hired by AA last year, had an October class tentatively scheduled before the bottom dropped out...guess I won't be holding my breath...didn't even get a # out of the whole thing. I'm just glad I didn't quit my day job!

Anyone else heard anything about AA future hiring? .. fat chance, I realize.

 

[HA25]

Jolly Roger, I too am in you same shoes. They will EVENTUALLY have to hire, unfortunately it will be later than sooner. I think we are looking at more than a year before all pilots are recalled or more. I also think that the current situation at the STL hub where they are over their quota for S80 captains will only work to hurt the situation as they may have to furlough 103 pilots to comply with the stupid language of the LLC agreement.

Its too bad that the ALPA and APA guys can just get along better, especially the ALPA guys who need to join APA and move forward.

 

[Mac34]

For what it is worth...

I had a Sept. 17 class with AAL last year. Of course that went away. I tried to find out where I stood in AAL's eyes. With no one to talk to at the pilot recruiting department (it has been disbanded) I was able to email a "higher up" in flight ops. It was his opinion that I would not be offered my hired status when things got back to normal at AAL. Not that I was going to wait around for AAL to call me for a class that will be years away. But it was something that made it easier to decide to get out and get another job.

Remember, that was one "respected" persons opinion and not official word from AAL.

 

[publisher]

Big 5

I have found Don Carty's comments to be candid and right on. We are going through a systemic change, not just a down cycle. This change has been coming for sometime but was masked by an economy that was on super charge.

On another thread someone was talking about the big 5. The thing is that two years from now might well be a different big 5.

 

[eaglefly]

...and if Carty and the other "big Tunas" get their way with baseball-style arbitration, the transformation will be stunning. Scope will be the first casualty. The floodgates will swing open and 70 and 90 seat RJ's will be at the larger regionals in droves (mainlines will shrink dramatically).

It has been repeated frequently that AMR management would like to run a 3-tier airline. Mainline flying 737-800 and larger (but drastically reduced in size, meaning substantial shrinkage to the tune of hundreds of aircraft over the next 5-10 years). Eagle flying 70 and 90 seat RJ's that would allow AMR to finally take on Southwest et al (suppliment W would also fall). A connection network to handle the smaller RJ's.

APA (and ALPA) know fully well that this is the MOST important aspect of airline pilot futures. If management emasculates labor with this proposal, its all over.

 

[rapidD]

eaglefly

I think you're right on. The same thing is going on at DAL, much to my chagrin. The industry has changed, if not forever, for a long time. Not just affecting those of us on furlough but the ENTIRE industry. The salad days may be over.

 

[ilinipilot]

Timing

Hello All,
Something not to be forgotten is the timing of the announcement. AA is involved in contract negotiations with their pilots at this time, and it is in their best interest (management) to paint a picture of bleakness to influence contract negiotiations.
I am not disputing the points made on the board about the industry changing etc but its much easier to ask for concessions and low-ball a contract when the times are bad. AA did the same thing last summer while negotiating with their FAs. They took a 400Mill write off to make there losses look larger and attempt to paint a picture of tough economic times.

D

 

[TWA Dude]

I also think that the current situation at the STL hub where they are over their quota for S80 captains will only work to hurt the situation as they may have to furlough 103 pilots to comply with the stupid language of the LLC agreement.

It could happen like that but I don't think it will. What kind of a union would force compliance with the contract when the result is the loss of it's own jobs? It'd work to nobody's advantage to ground STL MD80s so the APA Negotiating Committee is in talks with AA to get compliance without loss of jobs.

Its too bad that the ALPA and APA guys can't just get along better, especially the ALPA guys who need to join APA and move forward.

To be precise there is no more ALPA in STL, and just over half have joined APA thus far. Since the next 300 or so recalls are ex-TWA folks it's not to APA's advantage to encourage more furloughs regardless of how many STL guys join.

Regards, 96 from the bottom of the combined list.

 

[publisher]

Get over it

Everytime a person in position of authority speaks his mind on the state of the industry and his company, it is anti pilot and a negotiating ploy. Get over it.

What he is stating is that the traveling public has indicated that they will not pay for fringes, especially now.

What he is saying is that some others have found a formula that is successful in today's economy. The traditional American Airlines approach is not going to work in the future.

What he is saying is that you either adapt to the new way of business or perish.

Consistantly over the last 20 years, American has had the best major airline management in this country followed by Delta. You might want to listen to it.

 

[HA25]

I have just one word:

SCOPE

AA can negotiate what ever they want, but they best work on scope or they'll find those Fokkers flying under Eagle's certificate along with CRJ900's.

 

[HA25]

Lets keep in mind that SWA pays their pilots and probably many other work groups significantly less than AA and their pilot productivity is far greater. I would guess that the SWA pilot union will be seeking a MAJOR pay raise here in two years or so. This will make it a lot easier for AA and others to compete.

 

[publisher]

Again

Again, it is all not related to pilots and pilot pay.

Southwest beats AA on many fronts. On the ones they are close, they both probably beat the pants off of United and the other so called majors.

The fact that they are much more productive for whatever they are paid should send a message to someone.

 

[HA25]

yeah, that message will be to the National Mediation Board that will award the SWA F/A's and Pilots industry leading contracts and allow the company to better compete fairly with UAL/AMR etc.... And no, pilots aren't the only reason SWA makes money while AMR doesn't, however they are a major factor along with the F/A's and Mechanics all of whome are seeking major payraises.

I didn't get this from my own head, just listen to the Confrence call for the Q1 Earnings report for AMR. The CFO said that a major cause for the cost advantage that SWA has is labor cost/productivity and that this will lessen over time as the two (APA/SWAPA) converge......(more likely the SWAPA will come up to the APA).

 

[bluesideup1]

Re: Get over it

Consistantly over the last 20 years, American has had the best major airline management in this country followed by Delta. You might want to listen to it. [/B][/QUOTE]

Publisher,
I would love to hear what you are basing your opinion on how AMR has had the best major airline management in country. You must mean the supurb relationship that management has with all its employee groups or maybe the high ethical standards to which they adhere to. Maybe it is the constant belief that their own employees are the enemy.
The only reason this company continues to run despite the best efforts management has to make it disapear from the face of the earth is soley because the dedication and pride that each employee can give no matter how badly management trys to take it away.

 

[publisher]

right

bluesideup

I am reminded of a quote from when Crandall was CEO. A pilot was describing him, " He is a real son of a bitch, but, thank God he is our Son of a bitch."

The point was while all management sucked to him, at least he recognized that his guy was the best of the lot. Airline management has to get along with a large number of groups, not just pilots or even employees. Balancing all those groups and interests is what makes it so hard.

As to Southwest, they have become the best for many reasons. If I was trying to give a simple example of one reason it would be this. Flying Tigers, the cargo carrier, tried for a number of years to compete with Fedex in the overnight business. One of the reasons they failed was because they tried to mix overnight envelopes with regular freight. It did not work.

The dealing with regular freight was what took the time and more expense and made them non competitive.

Southwest only has one type of passenger, one type of plane, one set of standards of service, and people who believe they are the best. That is a winning combination today and tomorrow.

 

[alek]

AMR-Expand

Let me give you example of SWA employee relations.

Before 9/11 I talked to 2 pilots at SWA about their contract negotiations. Junior pilot, only 3 years with SWA was complaining about schedule, and pay. He told me he would go for UAL or DAL without looking back. However, senior pilot about 20 years with SWA told me this is the best place in the world and that the junior guys only make problems with the contract negotiations, they don't want to work hard ,,,, etc.

My point is after 9/11 I am sure everybody thinks SWA is the best employee company, they take care of their own people, no furloughs. If that is true, than why not sign Mechanics Contract without delays. Also, what will happen when SWA has 9000 pilots and they request same pay on the A/C as their friends at the other airlines. It will be interesting to see what will happen, with more people you will have also more problems. Junior pilots don't care so much about profit sharing. It is all about cash, and when economy goes back, they will forget that SWA didn't furlough after 9/11. Of course, I wish SWA all the best, they are there to keep Majors in balance, but never one side (SWA) has everything good and everyone else is just a looser.

As far as AMR, I would agree they have a solid Management. However, I think they should change their conservative approach to business. They have airplanes, people, they should attack market to attain greater share of passengers. Why put all TWA pilots in STL. They could create extra domiciles around country, and start same operation like SWA. If you have money you go against competition instead waiting to see what everybody else does. When UAL expanded in 80s/90s, they didn,t wait for the competition they went for the market. I think AMR business strategy was excellent when they were #2 Airline, but now being #1 you either learn very fast to lead or you end up second best again. Also, never understood, why can't they ones for all stop arguing with Unions and show to the rest of the business world being and staying #1 also requires fair relations with your Unions.

All the best Alek

 

[HA25]

Again, I say, Listen to the last AMR conference call to investors (on AMRCORP.com) and you will hear two things that I believe ar facts that have already been stated on this thread.

1. AMR is a very conservative company that understates everything and makes very conservative assumptions (as compared with other airlines).

2. SWA has a MAJOR advantage in that their labor cost (which is by far the largers cost to an airline) is smaller than all other carriers, other than AWA (don't ask my why they can't turn a profit).

With that, we can assume that AMR, which has $3 Billion in the bank and another $6 Billion in aircraft assets will be around for a long time. We can also assume that SWA will over time (maybe 5-6 years) begin to see labor costs grow and then they will really have to begin to compete. As of now, they are only competing with themselves, Jet Blue is too small to matter for now. Plus a 737 can only take you so many places, you still need cross the Pacific, and that costs a lot less to do when you pack the plane with 250+ vs the 140 or so a 737 can handle.

I predict that SWA will continue to grow, but at a much smaller rate. It kinda reminds me of NetJets, for a while everybody said that they will take over all of the Corporate Jet flying in the country because they do it cheaper. well they have not and they never will, they are a nich product and their customer base is very finite.

AMR will be back strong, and all of us with class dates that were cancelled (if we are determined) will get invited back to interview when they begin hiring, I'll bet on it.

 

[rapidD]

Guys

The bottom line is that when the economy is up, the big carriers thrive and are the place to be. When the economy is down, the low fare carriers and freight folks are the place to be. SWA has a great corporate climate and is a wonderful place to work. My buds there, though, were really bitching prior to 9-11 about the inequity of the pay scales. God knows where we're headed next but all of the optimism and pie-in-the-sky attributes of SWA, Jet Blue, et al should be kept in perspective of today's marketplace.