American Airlines Offers Prime Example of Union Poison

By John Romano

(YBH) – The nation’s third largest air carrier is saddled with a stupefying amount of debt and an estimated $800 million yearly cost disadvantage with its rivals. The reason? Union labor.

Along with smaller Southwest and Alaska Airlines, American is the only major carrier that has never declared bankruptcy. American has held steadfast against doing so even while competitors sought court protection to survive. Part of AA’s reason for not going the bankruptcy route? The company wants to honor its union contracts. A noble, if naive, move in 2011.

I say naive because the unions literally could care less about American’s attempts to stave off bankruptcy. The Transport Workers Union (TWU) and the Allied Pilots Association have repaid the airline by making the negotiation of a badly needed new contract a near impossibility. For years the employees have worked with an existing outdated and monstrously expensive contract. Airlines and employees are bound by law to existing contracts until a new contract is reached. There is no expiration on labor deals in the airline business, which suits labor just fine. While competitors have negotiated, or have forced, better deals through bankruptcy on the unions, American Airlines is slowly rotting from the inside out. Talk about no good deed going unpunished.

The thing is American Airlines has about $4.9 billion of cash on hand (along with $11 billion in debt) and the unions intend to get their hands on every penny. I’m reminded of a monologue from the movie “Goodfellas”, slightly modified, of course:

Now the guy’s got [the unions] as a partner. Any problems, he goes to [the unions]. Trouble with the [NLRB]? He can go to [the unions]. Trouble with [greedy politicians], [or the mainstream media], American Airlines, they can call [the unions]. But now the [company's] gotta come up with [the unions]‘s money every week no matter what. Business bad? FU, pay me. Oh, you had a fire? FU, pay me. Place got hit by lightning huh? FU, pay me.”

No company in its right mind would set up as a union shop in modern America. Unions played a key role in America’s 20th century expansion. Our labor market became the envy of the world because of organized labor. However, modern unionism is a cancer that eventually kills its host without exception. American Airlines offers a prime example.

John Romano is the publisher and editor of Yes, But However!, a musician, a former political correspondent for BBC Radio London, and a serial web entrepreneur. Follow him on twitter: twitter.com/yesbuthowever or John Romano on Google+

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Post Published: 02 September 2011
Found in section: Opinion

nk123
You forgot to mention Jetblue also is a US Major carrier as defined by the DOT. Since its founding in 1999, it has never declared bankruptcy. It is also the only airline post deregulation not to engage in any bankruptcy, merger, or acquisition activity in its first 11 years. Jetblue also just defeated a drive by ALPA to unionize its pilots by a 65-35% vote. It is the only major carrier to be 100% union free.

Christine8627000
your right about jet blue nk123. but how long do you think that they will remain non union? after aa gets their chapter 11 out of the way and cuts cost they will pull the same stunt united did then buy another carrier on the employees givebacks. jet blue and us air come to mind. of course it wont happen overnight but it will happen. if i were a jet blue employee id be a bit concerned.

mtaus
John is clearly an anti unionist with a very one sided and ignorant point of view.
I only hope his conditions and salary are one day cut as his bosses take millions in "bonuses" for performance that can be rated as mediocre at best.
I always laugh to myself when ignorant people blame unions instead of seeing corporate greed take place right before their eyes.
I guess John would somehow blame the state of the US economy on the unions representing the employees of Wall Street banks…
Oh wait, unions arent welcome on Wall St and look at whats happened…
And before anyone attacks my posting please know I am not an AA employee, just a citizen whos eyes are open wide enough to see the demise of this countries middle class and the greed of few take control like never before.
Rick
The employees of American Airlines are the only reason American never had to declare bankruptcy. Pilots, especially, gave ip 23% of thier pay as did many other work groups. And now thier management takes millions and millions in bonuses every year while crying poor mouth during negotiations with the very employees that keep the airline working.
This is exactly how class warfare begins.
Yous should be ashamed of yourself for spreading this kind of crap. Ashamed.
Jim
Americans troubles are not the result of union contracts. They are the result of a series of missteps and bad decisions by a top-heavy, inept management team. Furthermore, even Gerard Arpey of AMR in a statement to Wall Street claims that the cost advantage bankrupt carriers once had over AA is diminishing rapidly and will not exist in the future. Although AA touts pension liability as a ball and chain that impedes it's success, the truth is that due to market performance, AA did not make any pension contributions in 2010. RLA rules, which keep a contract in force after it's expiration, greatly benefit the company and is a detriment to employee's, all of whom have not seen a COLA increase in pay since the amendable date of their already concessionary contract. Some of those contracts expired in 2008. Fortunately, for Gerard Arpey and his lackluster management team; they instituted an executive compensation plan that rewards them irregardless of the success or failure of the airline. For Arpey, that has amounted to a 700% compensation package increase since 2003, the same year that AA employee's gave back 20-30% to save the airline. AA's managements only success has been to snatch defeat from the jaws of victory after the dramatic give-backs and sacrifice in 2003.
Kevin
Boy did John drink the Kool Aid! What John fails to mention, or perhaps he doesn't know because he re-wrote some AA press release and posted it as an article, that, or failed to do any research on the topic like a real journalist would do, is that AA's unionized employees gave up $1.9 billion to save the company from bankruptcy in 2003. As Rick pointed out, pilots gave up 23% in pay alone, and the flight attendants gave up 32% in pay and benefits. Since then, all upper management has done is take, take, take — $350 million in bonuses for the top 900 managers in the past six years. I would love to get a bonus for a mediocre (at best) job. That'd be nice.
What John also fails to mention is AA is in the middle of the pack in terms of flight attendant pay. That's right — smack in the middle of the Big Six with Southwest the highest and US Airways the lowest. Do flight attendants cost AA more in the long run? Yes, but that's not the flight attendants contract. AA can currently schedule flight attendants up to 82 or 87 flight hours a month, depending on the specific schedule, but routinely schedules flight attendants to under 70 hours. AA's crew productivity, or lack thereof, has for more to do with the company's own scheduling deficiencies than the flight attendants contract, and that's just one example, of one work group. AA could do a lot, without modifying any contracts, to bring their costs more in line with other carriers. While AA's flight attendants are paid no where near the top, AA's labor costs are sky high because of AA's own problems in management.
Employees gave up nearly $2 billion eight years ago and what does the company have to show for it? Nothing besides six years of executive bonuses. It's time to clean house at the top and then perhaps we can start to fix the airline we love.

Fuoco1
You should have written the article Kevin!
Did Romano really get paid for writting that?

Robert Stobaugh
Obviously you know nothing about what has gone on at American Airlines. Why don't you take a look at how poorly management runs the airline. Why don't you take a look at the 42 Vice Presidents American has.
You know nothing, NOTHING!!!!!!!!!!!!!!!!!!
Robert Stobaugh
Paul Ritz
In the “olden” days, before corporate greed became the norm, they used to fire CEO’s and VP’s for the kind of malfeasance parlayed on the employees and the shareholders of this once great airline. Today however, AA leaders reward themselves for incompetence while using the unions as a scapegoat for their erroneous ways. Arpey nor his “army” of VP’s have never owned a business. Never worked side by side with rank and file. They care nothing about the people in their charge. They care only about rewarding themselves prior to a bleak tomorrow for the rest of us. The local media has finally awakened to the realization that Arpey is incompetent. The question that begs an answer is: Who oversees these S.O.B.’s at the top? Who determines their fate if they fail or destroy a corporation. The answer; No one. They’re all part of the same country club, dedicated to protecting each others’ self interests. And American Airlines board of directors are the biggest perpetrators of this mentality. Bankruptcy? Gladly. But only if and when Arpey along with every single VP and director are shown the door.
Vortilon
I would like to see Bob Crandall come back and clean house. Starting with that weasel, Gerard Arpey. Then reduce the VP headcount by 40 or so. The consulting groups would be given the boot. The executives, analysts, and managers would be held accountable to do what they get paid to do.
Romano really showed his ignorance on the topic of employee pay and benefits at AA.
John Talty
You need to get your facts straight I am an aircraft technician for American Airlines and 7th in pay . The waist I see daily makes me sick. The only thing worse is ignorance. The unions are the only thing keeping American in the air. Our management team has managed to lose money every quarter. They are the ones that dictate that.Its their plan. The employees are just the pawns in the game its not their fault if you lose the guy moving the pieces that is to blame.
B. Whiting
Dear John Romano,
With regard to Union Labor…..You either have stock in American Airlines, or know someone that does…because let me tell you your a friggin idiot…come and work for a major US airline;and operatate under the same contract for almost 10 years without a raise, and better yet take a pay cut of 25,000 a year to keep your airline out of bankruptcy only to find they dont want to give it back after the 6 year deal they crafted plus 4 years of negotiations…Do the world a favor and resign you jack ass.
flyinghigh
This is a very ignorant attempt to blame unions for the fault of management. No one asked AA to buy TWA with promises of greatly increasing fleet and route size, only then to let it be wasted. The Board of American Airlines has made some pretty stupid decisions in the last 15 or so years, including operating one of the most diverse fleets in the industry. This greatly increases its operating budget, training, and maintenance costs.

American Airlines Offers Prime Example of Union Poison

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