AA Plans

[MD80DRVR]

B-Scale approved by the APA??? Get real. You'll never see a B-Scale approved at AA. They've been there and done that.

 

[pilot141]

Not only have we "been there, done that":
We approved the first B-scale, which dominoed to other airlines;
We were the last to get rid of B-scale: guys hired in 2000 still had to do a few months of B-scale after they got off probation. B-scale is a VERY ugly word at APA, and I never see it happening again.
To get back to the point of the OP, "AA Plans", I think Don Carty is accomplishing both of his objectives: positioning AA for a successful future, and lowering pilot's expectations during contract negotiations. There are many things going on here, but the most important are:
1. Passenger traffic has returned strongly. Sun July 7th AA set a record for RPMs (ever).
2. AA pilots are making up to 30% less than UAL and DAL pilots.
After parking airplanes, writing down the cost, and flying an 87% load factor on Jul 7th, AMR still claims to be losing money.
If a 30% pilot pay advantage combined with a record RPM day done with fewer airplanes cannot produce a profit, then the business model is flawed.
Now comes the kicker: what can be done? Do we scale back costs to meet the lower revenue? Or do we expand, and begin to charge small increases in fares? Don Carty says (during contract negotiations) that we have to shrink, and either lay off workers or accept XXX crappy deal. After we sign XXX crappy deal to prevent more threatened furloughs, watch for AA to expand like they should, but with the pilots holding the proverbial bag. Such is the job of the CEO, and such is the job of unions to prevent the bag from being too full.
While talking about this, why are AWA and AAA still in the game? Should we be forced into fare wares with companies that would be bankrupt except for federal loan guarantees? How about letting a couple of these companies go under and instantly getting rid of the excess capacity?
Just a thought as almost all companies struggle to make money. This is a capitalist market, right? Not a socialist one?

 

[publisher]

see

From Plane Business Banter

"Meanwhile, the boys down there in Ft. Worth with the silver airplanes said last week that they expect to announce further job cuts soon, as the airline admitted that changes in the marketplace are forcing American Airlines to restructure the way in which it operates.
While no details were forthcoming, I have a feeling we are going to hear some substantial news from the airline in the next two weeks. Perhaps in tandem with the airline's earnings announcement that is scheduled for next week. I would think one of the low-hanging fruit on the "possible" list would be a spin-off of the American Eagle operation, but much more than that is going to be necessary to get the airline back in the positive number column."

If only things were as simple as we thought.

Perhaps the fact that the costs at AA are less than United and Delta is why they are in better shape than those guys. Delta basically has expanded their regionals effectively reducing their crew costs while AA has stuck more to the letter of the law.

It also does no good to sit and point to one day load factor, especially when it was a giant holiday one. Come on, this is not airline anaylsis.

You spin it off to create value and cash, reduce liability, and you will still have the feed through contractural relationships/

 

[eaglefly]

It should be noted that Holly has a marginal history when it comes to accuracy.

 

[alek]

AA Advantage

I would have to agree with pilot 141.

AA saves about 600-700 Mil dollars compare to UAL, and DAL because they have old contract. You try to commute on AA and you will see about loads. Out of 10 flights, probably 9 are 90-95% full. Still AA complains about loses. I am sure yield is not there, but nobody has yield this days.

I think it is wrong to paint bleak picture of your airline so you can delay contract negotiations. That is old style. I bet they will delay it as much as they can, probably 2 years. I don't think the pay is the major problem, I think compare to ALPA, APA realized what threatens our pilot carriers are SJs or RJs.

"By changing their business" AMR should also change the way they deal with negotiations. Surprise everybody, sign contract early and move on with the business plan. I guess that is probably the dream world.

I can't wait to see how AA will respond to expansion of Low-Cost carriers.

Alek

 

[throttlejockey]

Here's my take on the AA/AE RJ situation:

In the late 80's and early 90's, Turbo-props were operated on a fee for departure basis. Majors were able to offer "joint-fares" from second and third tier cities which boosted traffic significantly from these cities since folks could fly from say Dubuque, IA to Orlando for the same price as ORD-MCO. Since then, RJ's have taken over much of this flying.

But the problem is that RJ's are much more expensive than turbo-props on a segment cost basis. Thus if loads and yields are not good, majors such as AA wind up subsidizing the losses incurred by operating the RJ. This is hitting carriers such as AA pretty hard right now since yields on feeder routes are not very good. The regional operators are guaranteed revenue, so most of the risk is taken by a major such as AA.

By having its own in-house regional operator, AA is basically stealing from Peter to pay Paul. (i.e. subsidizing Eagle at the expense of its own balance sheet).

It is my sense that AA would rather spin-off Eagle and at the same time let other RJ operators compete for the feed. Thus AA would get the benefit of the lowest bidder. In addition, being an innovator, I am sure that AA will be the first major to figure out a way to contract RJ flying on a "pro-rata" basis rather than "fee for departure" basis. This would mitigate AA's risk and place more of the risk of operating the RJ on the Regional Carrier.

As for AA pilots (APA) they should be frightened by the prospect of RJ's flying on a pro-rata basis. Since pro-rata flying requires the RJ to stand on its own, RJ's would be removed from flying to second and third tier cities (where they cannot make a profit on their own), and be placed on routes with higher loads and yields (i.e. cities being served by S80's and 73's.) The operating cost of an RJ is more consistent with these types of routes.

Thus AA pilots will loose jobs, and many cities will lose air service -all because of the RJ.

Let the flaming begin.

Regards,

throttlejockey

 

[VMC]

AA/AE

Eagle flying is busy with seats being filled.
I do not know where you state that Eagle is not generating revenue.

In regards to APA and ALPA not talking, we are trying to talk to APA. We need to unite and work together.

 

[publisher]

good points

Throttlejockey makes some good points.

The fact is that load factor is only part of the equation. A full aircraft flying for zero revenue has a load factor of 100%.

While the airlines were able to pare 18% of their flying, were they able to pare 18% of their total costs. No. If a gate is used for 5 flights a day rather than 10, the net effect is addional costs.

These are only a few examples but are symbolic of many.

Holly may have a track record of speculation but often she is right and we have already seen the trend. It makes sense. They will still have Executive at that point with turbo props.

The point that TJ makes about segment costs are dead on. The AE balance sheet looks better to the detriment of the major. If you were going to spin it off would it be quite so negative. No. You want that. Then you could renigotiate later after the spin off.

This may not happen but do not doubt the possiblity. Some of the Delta guys wouyld be right behind them..