Posts Tagged ‘American Airlines’
September 20th, 2013 at 11:45 am
Federal Regulators Make Move to Micromanage Company Pay
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Last week, we highlighted the latest in a long line of Dodd-Frank debacles.  Specifically, a federal court unceremoniously vacated a regulation forcing U.S. energy companies working abroad to disclose sensitive proprietary information to foreign competitors who aren’t subject to the same rule.  As we noted, federal bureaucrats were essentially trying to force domestic companies to surrender their playbooks to overseas rivals in the name of worldwide social engineering.

This week, we’re witnessing yet another Dodd-Frank infamy.

On Wednesday, a sharply divided Securities and Exchange Commission (SEC) proposed a controversial regulation that would require companies to tediously calculate compensation ratios between chief executives and employees for public scrutiny.  Keep in mind that public companies are already required to disclose compensation of top executives, so the proposed new rule won’t provide any useful information about a given company’s financial stability.  Rather, it is nothing more than a sop to activists who obsess over distribution of wealth and who seek to pressure businesses and executives.

To what end?  What business is it of the federal government how private companies choose to compensate every single one of their employees?  Why should companies’ time and resources be wastefully diverted to calculating ratios simply to please Washington, D.C. bureaucrats?  How will this help “protect” investors?  The simple answer is that it won’t.  Instead, it’s a provision sought by anti-corporate activists to foment discord and wage class warfare.

Moreover, the proposed rule may drive subject companies to shift even more workers overseas rather than here in the U.S., since foreign employees may be excluded from the burdensome calculations.  The proposed rule will also incentivize companies to remain or become private, rather than public, in order to escape these pointless burdens.  In turn, that would only serve to punish middle-class investors who don’t possess the wealth to participate in private investment.

While the SEC’s proposed pay ratio disclosure rule has yet to be implemented, the issue of executive compensation has also surfaced in the ongoing American Airlines bankruptcy.  This week, in U.S. Bankruptcy Court, Judge Sean Lane rejected the compensation package American Airlines’ creditors had approved for the airline’s CEO Tom Horton.  Largely due to the work of Horton and his management team, American’s performance in bankruptcy has exceeded all expectations — the company has experienced an almost total turnaround.  Furthermore, Horton’s compensation package is in line with industry standards.  Executives whose airlines fared far worse in bankruptcy than American received their compensation packages with little to no opposition.

An individual’s compensation at a corporation is a matter that should be decided by its leadership, board, and investors.  The government has no business intervening and micromanaging company pay, whether at American Airlines or all of the other U.S. public companies now moving within its sights.

October 5th, 2012 at 9:49 am
Enough Is Enough: CFIF Launches for Travelers Frustrated by Pilot Union Misbehavior
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Enough is enough.  It’s time to shine a brighter spotlight on pilot union attempts to sabotage American Airlines.  That’s why CFIF is launching – to ensure that travelers know who’s to blame for their frustrations.  No surprise – it’s the pilots’ union, the Allied Pilots Association (APA).

From time to time over the last five months, Jeff Mazzella, Renee Giachino and I have written about the APA’s antics.  You can read most of those things here or read my op-ed in the Washington Times.  In those commentaries we’ve made each of the following points:

–          The airline industry has changed dramatically over the last couple of decades, forcing every single legacy carrier to reorganize under bankruptcy.  American was the last to do so, holding out until last year.  The cause was simple: With the highest labor costs in the industry (bar far), American needed to do something to become more competitive.

–          Accordingly, American went about negotiating with each of their nine separate labor unions, representing flight attendants, mechanics and pilots. Eight of those nine unions ratified new contracts to help their employer and provide stability for their members.

–          The lone exception of those nine unions?  It was the APA – the primary pilots’ union. The APA rejected a generous offer that included pay raises and an equity stake valued at $187,500 for each of the 8,000 union pilots (13.5% of the company’s value).

–          At the same time, the APA used US Airway’s CEO, Doug Parker, to improve their leverage with American.  The APA cut a deal with Parker in case American and US Airways were to merge – even though Parker’s own US Airways pilots have gone seven years without a contract. (Parker has said that everyone will have their cake and eat it too if he combines the airlines.  That’s unrealistic and disingenuous, but it’s a matter for a different day.)  For more on this, read my interview in the Phoenix Business Journal.

–          Ultimately, if American’s pilots stubbornly refuse to accept a new contract, they could effectively send their employer, or perhaps the entire airline industry, the way of the auto industry.  The difference this time would be that taxpayers won’t be so enthusiastic about bailing them out.

Words are no longer enough. Thousands of travelers have been disrupted by the holdout pilots’ union, and we want to afford those inconvenienced travelers an opportunity to give the pilots a piece of their mind.  That’s why we built – to give consumers a chance to tell the pilots to settle their disputes without inconveniencing the rest of us.

August 10th, 2012 at 12:52 pm
American Airlines’ Labor Union Antics Continue

In yet another example of big labor flexing its destructive muscle to undercut American Airlines’ bankruptcy restructuring, the Allied Pilots Association this week rejected a contract offer from American that included pay raises and a 13.5 percent stake in the company, among other generous terms. 

To make matters worse, afterwards, the union board forced its president David Bates – who has a reputation for being both reasonable and pragmatic – to resign as seemingly a sole consequence of his support for American’s offer. 

It’s now beyond clear that the pilots union is going all in with US Airways CEO Doug Parker, who has made numerous promises to labor in his recent attempts to prematurely force a merger with American. This is the same CEO Parker who, since uniting America West with US Airways seven years ago,  has been unable to settle terms with the pilots of those airlines, even while he is now actively negotiating with American’s pilots. 

The fact remains that the entire airline industry was bloated during the last decade, and every legacy carrier has been forced to restructure to reduce their costs. While American – whose onerous labor costs are the highest in the industry – waited the longest to restructure, the company has recently excelled financially. To sustain its recent performance, however, there is no getting around the fact that it will need  to continue to cut costs, which means labor will have to agree to reasonable concessions.

Fortunately, a number of other unions have been more agreeable in their negotiations with American: mechanics and aircraft stock clerks represented by  the Transport Workers Union both ratified new accords this week. 

But if American’s pilots are unable to cooperate with their own labor leadership, colleagues and management to accept generous but realistic contract terms, they could effectively send their employer, or perhaps the entire airline industry, the way of the auto industry.

The difference this time being, the taxpayers won’t be there to bail them out.

June 21st, 2012 at 1:30 pm
Podcast: Big Labor’s Antics Continue
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From breaking state budgets to disrupting private airline industry reorganization, CFIF’s Timothy Lee discusses the latest antics of big labor unions.

Listen to the interview here.

June 7th, 2012 at 3:56 pm
Video: Big Labor is at it Again
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In this week’s Freedom Minute, CFIF’s Renee Giachino discusses Big Labor’s destructive tactics in both the public and private sectors, including labor union efforts to undercut the bankruptcy restructuring process of American Airlines.

May 8th, 2012 at 5:07 pm
Big Labor Attempts to Commandeer American Airlines
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Big Labor is at it again.  This time in the airline industry.

As you’ve probably heard, US Airways has proposed a merger with American Airlines, and the latter’s labor unions have eagerly pursued contract agreements with their potential new employer.  A benevolent effort meant to expedite the process?  Hardly.  Rather, it is a hasty, thinly-veiled act of desperation.  Instead of allowing American’s bankruptcy restructuring process to run its natural course, and a stronger airline to emerge, American’s unions have acted in a manner that can only serve to muddle and complicate the situation.

Here’s the critical fact to keep in mind: American Airlines reached its current predicament due primarily to its onerous labor costs.  Its industry-high labor costs, representing fully 28% of its revenue, led to bankruptcy.  Now, however, its unions seek to repeat that futile process by pursuing similar deals with US Airways.  It defies history and economic reality to believe that a new merger under similar conditions would create such a magical synergy allowing the new contracts to be sustained for a lasting amount of time.

On top of that, successfully integrating two separate workforces into one can be a logistical nightmare.  After all, US Airways itself has yet to fully integrate the new employees it acquired with its 2005 takeover of America West Airlines.  Pilots from both carriers have engaged in an ongoing dispute over seniority and pay scales, and to this day US Airways and America West essentially operate as two separate entities, with US Airways pilots only flying US Airways planes and vice-versa.  How could repeating that scenario be expected to create sudden synergies or cost savings?  What evidence is there that this union-proposed takeover might play out differently?

Make no mistake – we at CFIF don’t maintain any inherent antipathy toward mergers.  We do, however, recognize the pitfalls and dangers of mergers suspiciously pursued and negotiated by union bosses.  The unfortunate reality is that this appears to be yet another example of Big Labor pursuing its own interests at the expense of the rank-and-file employees it claims to represent.

By way of historical background, the airline industry has changed rapidly over the years due to rising fuel costs and other market forces.  Countless carriers have restructured union contracts or merged with competitors to reduce costs and remain in the market.

American Airlines stands as the lone exception.

American has never merged with another airline, and until this year it had never filed for bankruptcy.  As a result, its unionized employees have enjoyed arguably the best salaries and benefits packages in the industry.  And in an ironic bit of history, US Airways has itself gone through several bankruptcies over the years, and even frozen or terminated pensions and many of the types of benefits they’re apparently ceding to American’s labor unions in hopes of a quick deal.

We live in economically uncertain times, in which the cushy union contracts of old have become outdated and fiscally unsustainable.  The fact that American, once the nation’s model airline, is bankrupt is itself evidence of how challenging it has become to operate in the industry.  Big Labor knows this well.  After all, it represents a significant percentage of the industry workforce.  Sadly, however, it refuses to learn the straightforward lessons of recent history, and instead continues to demand unreasonable contracts that will put the longevity and viability of airlines at risk.  In so doing, shortsighted union leaders place their own survival above that of their members.  They concern themselves primarily with replenishing their coffers and pursuing political victories financed by union dues.

That imprudent approach may benefit the union leadership in the near term.  But in the end, it proves to the detriment of average unionized American Airlines employees, as well as customers due to the reduced long-term viability of a bloated, union-controlled airline.  The alternative is to allow American the opportunity to right the ship and carve out a new, mutually-beneficial agreement with its employees.  Concessions will need to be made by both management and labor, and it will necessary for American Airlines’ bankruptcy proceedings to run its course.

The Big Labor alternative to repeat the unsustainable cycle will merely prolong the misery at the expense of employees and consumers.