Now that I’ve had 24 hours to reflect on the Chapter 11 filing of American, I have decided to share a few thoughts. I don’t typically comment in depth on airline business decisions for a variety of reasons. One of those is that my work, while not directly related to the airline industry, does sometimes require me to interact with airline managers at a fairly senior level and I don’t want to run the risk of getting anywhere near any conflict of interest type issues. I do NOT blog about anything related to my day job here, and I aim to keep it that way. That said, I cannot let yesterday’s events go by without saying something. Be warned, this is a fairly lengthy post, includes more history than you probably care about, and is a whole lot of “my opinion.” Take it for what you may.
As many of you know, my very first post-college working years were spent with American Eagle and American Airlines. I flew Jetstreams and Saabs for American Eagle at first. Then, at age 26, I was diagnosed with Type 1 Diabetes and that…as they say…was that for my flying career. Shortly thereafter, I applied for a job at American. Since Eagle was owned by AA, it was basically a transfer to a different job. I spent four years working at American’s Maintenance and Engineering base in Tulsa, Oklahoma. The job I did required quite a bit of travel and I spent many weeks on the road each year. Even though I was traveling on company business, the travel was still “space available.” Nonetheless, I was able to pick my flights carefully, and never really had any issues. My international trips were almost always in First or Business Class, and it was my employment at American Airlines that enabled me to travel the world on a dime, mostly the company dime, and experience things like international First Class. The first caviar I ever tasted was served to me by an American flight attendant on a 3-class DC-10 flying from Miami to Los Angeles. Those were the days! That same flight attendant sang “happy anniversary” to me because the date of that flight happened to be my company hire date, December 6th. Can you imagine that happening now?
My job required that I spend a lot of time working in our airports and I began to think that I might like to try my hand at working in one of our airport operations. Convincing anyone to hire me as an Customer Service Manager with no airport customer service experience proved to be a trick worth writing a book about. By the time I arrived at Washington National Airport for my umpteenth interview, I’d almost given up on trying to make the career change. I don’t know whether it was the interview practice from all my failed attempts, or God’s plan to move me to Washington, DC, but I got myself a new job as Customer Service Manager at DCA. After several weeks of training I parachuted into one of the busiest airports in the country managing a team of people that knew a whole lot more about what we were doing than I did. Maybe it was will power, maybe it was my effervescent personality, or maybe it was luck, but somehow, I survived. Actually, I didn’t just survive. I wasn’t perfect, but I turned into a pretty damn good manager if you ask me. That’s probably because I had the good sense to shut up and listen to those people I managed that knew more than me. I don’t know what it is about an airport operation, but you tend to lean on each other, depend on each other in ways that a run of the mill office environment just can’t match. I made a lot of friends for life during my time at American Airlines and that’s why I’m writing this with a bit of a heavy heart.
I’ve expected that American would file for bankruptcy for sometime. I had no idea it would be yesterday morning, but the writing has been on the wall for a while now. In a way, I suppose filing now is better than waiting while cash burns go up during the winter. With a little over $4 billion in the bank, American has some wiggle-room while it works through the bankruptcy process. But still, I’m a little chagrined that it came to this. I was there in the dark days of 2003 while the company bargained with the unions for concessions. I remember feeling like a big burden had been lifted when things were worked out with the unions. Being management, there was no negotiating on my salary. I just got a form letter with my new annual salary printed on it.
I left American in 2004 for “greener” pastures, but continued to follow news about the company with interest. I was pleased to see the progress made in working with each of the organized labor groups. Working together produced a lot of great things, not the least of which was a much more efficient airline that actually performed its own aircraft maintenance while other airlines sourced theirs to other countries. I really began to think that the company was starting to fire on all cylinders and might actually have a permanent fix for its historically rocky labor relations. American even began to make a little money and as a result, its share price rose too. And it was that rising share price going into 2007 that ultimately ensured that American Airlines filed for bankruptcy yesterday.
I can honestly say that I could care less how much executives are paid. But in the case of American, a portion of executive compensation is based on how the company’s stock performs. Not such a bad thing on the surface, but here’s the wrinkle. American’s senior management benefited from a program that provided some significant dollar amounts while the company’s employees were working under concessionary contracts or imposed wage reductions with the prospect of only 1.5 percent annual pay raises as far as the eye could see. The end result was predictable. Angry employees and no chance to work together to fix the very real issues that American was facing. That said, American’s unions have their own issues that need to be addressed as well. I don’t expect bankruptcy to be a pleasant experience for them, and unfortunately, for their members.
A lot of people that I consider to be my friends will be upset with me for saying this, but I’m going to anyway. When I worked at American, I thought Gerard Arpey was a good person, and I still do. I did not know him personally, but did meet him on numerous occasions while at American. He was always a gentleman. However, I think Mr. Arpey is a good man who made an enormous error in judgement when he did not do something to stop or modify the stock based incentive program that resulted in some enormous payouts to a few senior executives. The optics of it can’t be denied. It was a bad idea to allow a few top people to collect large sums of money while their employees labored under concessionary wage agreements….PERIOD.
Now, American must get about the business of fixing itself. The airline is burdened with higher labor costs than many of its competitors. Please don’t send me any hate mail about hourly wages being lower than airline X. Labor costs are never solely about an hourly wage. Then there are any number of equipment and real estate costs that will need to be attacked too. I don’t even want to think about what might happen to employee pensions. Beyond costs, I think its generally accepted that American is suffering on the revenue production front too. Could domestic codesharing be part of the solution? Other airlines have the ability to codeshare domestically. I’d bet American will soon. I will watch how American corrects its revenue issues with interest.
In closing, I want to say that I am very sorry that this has happened. I’m sorry that American’s employees, many of whom I call my friends, are faced with the stress and uncertainty of bankruptcy. A very difficult reality is about to hit a lot of good people and my heart goes out to them. If you couldn’t tell, I’ve still got a little bit of red, white, and blue in me. AA, I’m pulling for you.