AA Freezes Mgmt Wages; Asks Employees To Forgo 2003 Raises

JW · 12-09-2002, 12:11 PM

AMERICAN FREEZES MANAGEMENT WAGES; ASKS ALL EMPLOYEES TO FORGO 2003 INCREASES

Quote:

Fort Worth, Texas – American Airlines today asked all employees to forgo pay increases next year as part of the company’s aggressive efforts to stem short-term financial losses. Company executives met today with union leaders representing pilots, flight attendants and ground personnel at AA headquarters to make the request. They also met with other employee groups to explain the need to forgo these pay increases.

diamondd5 · 12-25-2002, 07:15 PM

This message was sent to me by a retired employee of AA.

Hi People,

The following e-mail was sent to Don Carty & Jane Allen. I withheld the name of the author but I can assure it it's authentic.

******************************************

Dear Mr. Carty & Ms. Allen,

As I take management's request of a pay wage freeze very seriously, before I am able to make an informed decision, I have heard evidence of lavish expenditures by management that I would like you to confirm or deny. This would assist me in reaching a decision on how to cast an informed ballot.

1. Not long ago, AA hired helicopters to drop orchids. If so, for what purpose was this done and what was the cost?

2. Jane Allen's party of four boarded a flight bumping 4 first class passengers and 4 people were paid $300 each to get off (A-2 & A-4 pleasure trips force full-fare passengers off full flights). If this is standard operating procedure, don't you think this is detrimental to our plight?

3. AA bought several cappuccino machines for flight which were not tested first and were then found unusable? Not to mention the S80 in-flight automated P.A. system which also failed. (How much was the total cost of these combined mistakes?)

4. AA is paying $16 a day for management to park in the terminal parking lot. Shouldn't ALL terminal employees be parking in the employee parking lot to save costs?

5. We have flight service managers who have enough time to do grooming checks (sometimes 2 FSM's per crew), observation rides (costs involved using resources to book the reservation, displacing revenue/non revenue dollars and access to seats, as well as food/beverage, hotel costs and other misc. expense account charges), which do nothing but lower morale more than it already is. Is the length of my dress more important than the attitude I display to my passengers after a grooming check? I would like to know if these managers have received any training on morale and how to motivate employees because it certainly is not evident.

Additionally I'd like to mention the absolutely ludicrous attendance policy which lowers our morale to the bottom of the charts. Lowering morale is the biggest mistake you can make as we have the most impact on passenger loyalty. Is this not our number one concern at this point?

6. For the 2002 election, airlines have given congressional candidates and the two major political parties $4.1 million, and last July, American Airlines executives gave more than $20,000 to a campaign fund that benefits House Minority Leader Richard Gephardt, D-Mo., and other House Democrats.

7. AA is paying $14.6 million to upgrade the STL airport (preconditioned air to Jetbridges, installing closed circuit TVs in the terminals, and replacing carpeting in the terminals), $1.1 billion dollars on the
international terminal in DFW, $1.5 billion dollars on a terminal at Miami, and $1.3 billion dollars on a terminal at JFK? This is a total of nearly FOUR BILLION DOLLARS! We've been told that it would be more expensive to halt these projects than to complete them. I would like actuary
justification of these statements. Didn't the AA Legal Dept. provide for an escape or cessation clause in these contracts?

8. AA is paying $40 million over 20 years to put its name on the AA Arena in Miami, $195 million over 30 years to have its name on the Dallas arena, and $8.5 million for the Roundabout Theater? (Please don't tell me that our AMR Legal Dept. wasn't smart enough to include an escape clause on these contracts or do you acutally consider all these upgrades & advertising essentials?)

10. Mr. Carty received 6 months off his retirement for every year served at AAL and is now receiving his retirement 12 years early. It has also been reported that his retirement is around $80 million.

I can only imagine what other expenditures AA management deems "essential" to running this airline. It looks to me as if you are asking labor to pay for mistakes made by management.

Mr. Carty, as you refuse to share with your employees in good times and continue to spend money on frivolous management perks in bad times, I cannot with a good conscience vote to give up a raise which is already eroded by pre-funding installments, increased monthly medical/dental costs. The cost of living increase alone wipes out the entire raise.

Let me quote someone who made an excellent observation, "We are losing $5-6 million per day. $130 million in pay freeze. Be gone in 26 days. Then what?"

Here are 2 additional quotes I would like to share:

11/23/02 USA Today:

"More than 40 U.S. steel companies, stuck with high fixed-cost structures that make it hard to be nimble, have gone bankrupt in recent years. Yet Nucor continues to thrive. It pays its steelworkers $70,000 to $100,000 per year, far above the industry average. And it has never gone through a layoff. ''When business is bad, as it's bound to occasionally be in a highly cyclical industry like ours, the first thing to go is every executive perk and bonus, followed by every plant manager and supervisor giving up theirs,'' says Nucor's CEO, Dan DiMicco.

In reference to competing with lower-cost carriers (i.e., Southwest): "Speaking of delusions, American would actually have to change its corporate culture, instead of just talking about it. In a recent business book it was written, 'Where a less farsighted businessman might have tried to
keep costs down by treating his employees like dirt, Herb [Kelleher] understood that speed (in this case, quick turnarounds at the gate), safety and flexibility would do more to keep costs down than screwing his employees. So, Southwest has the most heavily unionized workforce in the airline
business – and the happiest.' In Fortune magazine, Kelleher himself wrote, 'You have to treat your employees like your customers. When you treat them right, then they will treat your outside customers right. That has been a powerful competitive weapon for us.' Among other things, high morale equals high productivity. It's an intangible that adds to the bottom line and one that American, and most other premium carriers, has chosen to ignore. However, maybe what Carty really should be looking at is bringing down American's executive compensation costs down to that of Southwest's. Last year, AMR lost $1.7 billion, but Don Carty's compensation package for 2001 was valued at $7.1 million. Southwest, on the other hand, actually earned a profit last year of $511.1 million. Its CEO, James Parker, had a pay package of $4 million. Hence, Carty's pay package was 77.5% higher than Mr. Parker's. When comparing financial performance, the disparity between the
two doesn't quite make economic and justifiable sense. Perhaps Carty would think twice of intoning comparisons to Southwest if he knew the first thing to come down to the level of Southwest would be CEO pay."

I would truly love to hear both your responses regarding employee morale. Do you honestly not realize the impact that poor morale among Flight Attendants has on our customers?

I realize there are numerous and important questions here, but an answer to each would help the flight attendant workforce in our decision to forego our raise.

Thank you and I look forward to your prompt response.

******NAME WITHHELD********

P.S. Mr. Carty has recently been quoted as saying "The greatest sin of
airline management of the last 22 years is to say, It's all labor's fault.".
Yet, if we refuse this wage freeze, I can see the headlines now, "AA Says
Labor Refuses To Help Bail Out Airline During Crisis".

dbaker · 12-25-2002, 10:04 PM

Although item numbers 1 through 4 bring up some questionable expense decisions, the rest seem to describe normal business expenses. You have to continue to maintain, renovate, and innovate your product so that it's competitive or you're shooting yourself in the foot. You have to spend money to make money

What is the pay freeze situation? You either take the offer or leave the company and are replaced with someone who will work for less?

diamondd5 · 12-26-2002, 04:00 PM

I think that if management has made that many poor decisions that cost the company millions if not billions of dollars they should look at cutting costs at upper management levels and maybe jobs. AA is cutting head count in some departments back to 1992 seniority yet they still have just as many management positions filled. I just think you can't run an entire business from behind a desk.

diamondd5 · 12-26-2002, 04:28 PM

This letter was written by a former management team that was furllowed last year for wanting to run his department to the best of his ability and voice his opinion when he didn't agree with other's trying to run it for him.

Good Morning and Merry Christmas to all of you!

WOW! What a powerful letter. And to think that this is the same attitude that AA upper management has had for many years. This appears to be especially true under the Carty regime. Could it be that having MBA's on the front line, sensitivity mandates to consider everyone's feelings and the correct ethnic and gender background did not keep AA the great airline it once was? I know that's not how AA grew to what it once was, but then me and quite a few others were considered out of touch with the every day front line employee. I thought by now that getting rid of me and many others who were considered non politically correct employees AA would have turned it around and be financially and morally secure like Southwest and/or Continental. Go figure! My mistake!

I want to take this opportunity to wish all of you and your families a very Merry Christmas and a safe and prosperous 2003. It was never my intention to use this venue as a way of taking a slam at the current AA management. Many good management people were kept, but unfortunately they are unable to be positive factors or speak out as they fear for their jobs. It has been well over a year since I was let go, but I miss you guys and only wish the best for all of you and for AA. Unfortunately, I fear you are headed in the direction of United and US Air as you exist and operate today. I have discovered there is life after AA and there are still bosses out there that value my opinion and allow me to speak my mind. I'm enjoying my new career and even though I don't get back to Dallas much these days I promise if I do I will stop by. Give my best to everyone and tell them to hang in there.

Your Friend and Brother,
---NAME WITHHELD----

12-25-2002, 07:15 PM	#2
diamondd5 Junior Member Join Date: Dec 2002 Posts: 3	AA's wage freeze This message was sent to me by a retired employee of AA. Hi People, The following e-mail was sent to Don Carty & Jane Allen. I withheld the name of the author but I can assure it it's authentic. **************************************** Dear Mr. Carty & Ms. Allen, As I take management's request of a pay wage freeze very seriously, before I am able to make an informed decision, I have heard evidence of lavish expenditures by management that I would like you to confirm or deny. This would assist me in reaching a decision on how to cast an informed ballot. 1. Not long ago, AA hired helicopters to drop orchids. If so, for what purpose was this done and what was the cost? 2. Jane Allen's party of four boarded a flight bumping 4 first class passengers and 4 people were paid $300 each to get off (A-2 & A-4 pleasure trips force full-fare passengers off full flights). If this is standard operating procedure, don't you think this is detrimental to our plight? 3. AA bought several cappuccino machines for flight which were not tested first and were then found unusable? Not to mention the S80 in-flight automated P.A. system which also failed. (How much was the total cost of these combined mistakes?) 4. AA is paying $16 a day for management to park in the terminal parking lot. Shouldn't ALL terminal employees be parking in the employee parking lot to save costs? 5. We have flight service managers who have enough time to do grooming checks (sometimes 2 FSM's per crew), observation rides (costs involved using resources to book the reservation, displacing revenue/non revenue dollars and access to seats, as well as food/beverage, hotel costs and other misc. expense account charges), which do nothing but lower morale more than it already is. Is the length of my dress more important than the attitude I display to my passengers after a grooming check? I would like to know if these managers have received any training on morale and how to motivate employees because it certainly is not evident. Additionally I'd like to mention the absolutely ludicrous attendance policy which lowers our morale to the bottom of the charts. Lowering morale is the biggest mistake you can make as we have the most impact on passenger loyalty. Is this not our number one concern at this point? 6. For the 2002 election, airlines have given congressional candidates and the two major political parties $4.1 million, and last July, American Airlines executives gave more than $20,000 to a campaign fund that benefits House Minority Leader Richard Gephardt, D-Mo., and other House Democrats. 7. AA is paying $14.6 million to upgrade the STL airport (preconditioned air to Jetbridges, installing closed circuit TVs in the terminals, and replacing carpeting in the terminals), $1.1 billion dollars on the international terminal in DFW, $1.5 billion dollars on a terminal at Miami, and $1.3 billion dollars on a terminal at JFK? This is a total of nearly FOUR BILLION DOLLARS! We've been told that it would be more expensive to halt these projects than to complete them. I would like actuary justification of these statements. Didn't the AA Legal Dept. provide for an escape or cessation clause in these contracts? 8. AA is paying $40 million over 20 years to put its name on the AA Arena in Miami, $195 million over 30 years to have its name on the Dallas arena, and $8.5 million for the Roundabout Theater? (Please don't tell me that our AMR Legal Dept. wasn't smart enough to include an escape clause on these contracts or do you acutally consider all these upgrades & advertising essentials?) 10. Mr. Carty received 6 months off his retirement for every year served at AAL and is now receiving his retirement 12 years early. It has also been reported that his retirement is around $80 million. I can only imagine what other expenditures AA management deems "essential" to running this airline. It looks to me as if you are asking labor to pay for mistakes made by management. Mr. Carty, as you refuse to share with your employees in good times and continue to spend money on frivolous management perks in bad times, I cannot with a good conscience vote to give up a raise which is already eroded by pre-funding installments, increased monthly medical/dental costs. The cost of living increase alone wipes out the entire raise. Let me quote someone who made an excellent observation, "We are losing $5-6 million per day. $130 million in pay freeze. Be gone in 26 days. Then what?" Here are 2 additional quotes I would like to share: 11/23/02 USA Today: "More than 40 U.S. steel companies, stuck with high fixed-cost structures that make it hard to be nimble, have gone bankrupt in recent years. Yet Nucor continues to thrive. It pays its steelworkers $70,000 to $100,000 per year, far above the industry average. And it has never gone through a layoff. ''When business is bad, as it's bound to occasionally be in a highly cyclical industry like ours, the first thing to go is every executive perk and bonus, followed by every plant manager and supervisor giving up theirs,'' says Nucor's CEO, Dan DiMicco. In reference to competing with lower-cost carriers (i.e., Southwest): "Speaking of delusions, American would actually have to change its corporate culture, instead of just talking about it. In a recent business book it was written, 'Where a less farsighted businessman might have tried to keep costs down by treating his employees like dirt, Herb [Kelleher] understood that speed (in this case, quick turnarounds at the gate), safety and flexibility would do more to keep costs down than screwing his employees. So, Southwest has the most heavily unionized workforce in the airline business – and the happiest.' In Fortune magazine, Kelleher himself wrote, 'You have to treat your employees like your customers. When you treat them right, then they will treat your outside customers right. That has been a powerful competitive weapon for us.' Among other things, high morale equals high productivity. It's an intangible that adds to the bottom line and one that American, and most other premium carriers, has chosen to ignore. However, maybe what Carty really should be looking at is bringing down American's executive compensation costs down to that of Southwest's. Last year, AMR lost $1.7 billion, but Don Carty's compensation package for 2001 was valued at $7.1 million. Southwest, on the other hand, actually earned a profit last year of $511.1 million. Its CEO, James Parker, had a pay package of $4 million. Hence, Carty's pay package was 77.5% higher than Mr. Parker's. When comparing financial performance, the disparity between the two doesn't quite make economic and justifiable sense. Perhaps Carty would think twice of intoning comparisons to Southwest if he knew the first thing to come down to the level of Southwest would be CEO pay." I would truly love to hear both your responses regarding employee morale. Do you honestly not realize the impact that poor morale among Flight Attendants has on our customers? I realize there are numerous and important questions here, but an answer to each would help the flight attendant workforce in our decision to forego our raise. Thank you and I look forward to your prompt response. **NAME WITHHELD****** P.S. Mr. Carty has recently been quoted as saying "The greatest sin of airline management of the last 22 years is to say, It's all labor's fault.". Yet, if we refuse this wage freeze, I can see the headlines now, "AA Says Labor Refuses To Help Bail Out Airline During Crisis". __________________

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12-25-2002, 10:04 PM	#3
dbaker Senior Member ITYT Captain Join Date: Sep 2001 Location: IAH/HOU Posts: 2,354	Although item numbers 1 through 4 bring up some questionable expense decisions, the rest seem to describe normal business expenses. You have to continue to maintain, renovate, and innovate your product so that it's competitive or you're shooting yourself in the foot. You have to spend money to make money What is the pay freeze situation? You either take the offer or leave the company and are replaced with someone who will work for less?

12-26-2002, 04:00 PM	#4
diamondd5 Junior Member Join Date: Dec 2002 Posts: 3	I think that if management has made that many poor decisions that cost the company millions if not billions of dollars they should look at cutting costs at upper management levels and maybe jobs. AA is cutting head count in some departments back to 1992 seniority yet they still have just as many management positions filled. I just think you can't run an entire business from behind a desk.

12-26-2002, 04:28 PM	#5
diamondd5 Junior Member Join Date: Dec 2002 Posts: 3	This letter was written by a former management team that was furllowed last year for wanting to run his department to the best of his ability and voice his opinion when he didn't agree with other's trying to run it for him. Good Morning and Merry Christmas to all of you! WOW! What a powerful letter. And to think that this is the same attitude that AA upper management has had for many years. This appears to be especially true under the Carty regime. Could it be that having MBA's on the front line, sensitivity mandates to consider everyone's feelings and the correct ethnic and gender background did not keep AA the great airline it once was? I know that's not how AA grew to what it once was, but then me and quite a few others were considered out of touch with the every day front line employee. I thought by now that getting rid of me and many others who were considered non politically correct employees AA would have turned it around and be financially and morally secure like Southwest and/or Continental. Go figure! My mistake! I want to take this opportunity to wish all of you and your families a very Merry Christmas and a safe and prosperous 2003. It was never my intention to use this venue as a way of taking a slam at the current AA management. Many good management people were kept, but unfortunately they are unable to be positive factors or speak out as they fear for their jobs. It has been well over a year since I was let go, but I miss you guys and only wish the best for all of you and for AA. Unfortunately, I fear you are headed in the direction of United and US Air as you exist and operate today. I have discovered there is life after AA and there are still bosses out there that value my opinion and allow me to speak my mind. I'm enjoying my new career and even though I don't get back to Dallas much these days I promise if I do I will stop by. Give my best to everyone and tell them to hang in there. Your Friend and Brother, ---NAME WITHHELD----