Members of the Transport Workers Union (TWU) were scheduled to vote on a new contract with American Airlines, or AA, this December that would have lowered the airline’s cost and outsourced hundreds of jobs that weren’t directly related to aircraft maintenance. They never got the chance because American instead filed for bankruptcy. On Wednesday AA announced it planned to outsource just about all of them — 4,600 mechanics jobs are going, along with 4,200 ground-service positions, 2,300 flight attendants and 400 pilots. About 15% of American’s work force is getting a one-way ticket to Termination, Texas — thank you for dying with us today.
Of the cuts, the latter two figures make the most sense: American isn’t likely to be needing as many flight crews by the time its bankruptcy is settled because passengers are going to be bailing. Flying is horrible to begin with, and flying an airline run by a group of really angry people isn’t likely going to enhance the service level.
American was the last of the majors to file for bankruptcy — some have gone through the Chapter 11 bath twice — but it’s a standout for another reason. Over the long term, it has arguably been the worst-managed major airline — perhaps the worst-managed service company — that’s still in business. Over the past decade American has lost some $11 billion, which is about 15% of the industry’s total losses over the history of the entire industry. That’s quite an accomplishment.
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AA is an airline that always seems to be mad at someone: employees, competitors, passengers, governments, OPEC. The company has been at war with its unions for years. Granted, the TWU is a rough crew, and the pilots are no picnic either. But both groups already negotiated givebacks and the TWU was on the verge of coughing up some more. Blaming the unions, which is basically what management is doing, misses the point. As a very smart CEO of a unionized company said to me years ago: “If you aren’t getting along with your union workforce, don’t call it a labor problem because it’s not. It’s a management problem.” And American has managed its workforce badly for years.
American has historically tried to do everything but compete. It has been trying for years to carve up the London/New York City market with British Airlines, despite the furious protest of Sir Richard Branson at Virgin Atlantic. Indeed, American also tried hard to prevent Virgin America, in which Branson had an interest, from even getting off the ground. American instead should be trying to copy Virgin America, which has one of the best service products in the air and can charge premium prices because of it. Instead, American has been losing altitude in critical markets such as New York City and Chicago, and can’t grow revenues. You can’t pin the lack of revenue growth on mechanics or ground crews. As airline analyst Vicki Bryan of Gimme Credit told the New York Times: “They are still playing football with a leather helmet against Delta and United.” Killer quote, that.
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Instead, American screwed everybody, including the Dallas–Fort Worth area, which lured American there in 1979 and where American is planning to close its maintenance base. American intends to outsource most of that work now, and it’s even possible that the work on the engines of American Airlines won’t be done in America, though a maintenance facility in Tulsa, Okla., will be expanded. AA also failed to make most of the payments due on its pension plans — meaning it is trying to dump future obligations onto taxpayers. Shareholders, of course, get wiped out.
If top managements abruptly decides that it has 13,000 too many employees, shouldn’t the first cuts be to top management, where all the bad decisions were made? That’s probably why other companies are sniffing around American. They’re probably thinking that anyone could run the company better than its current management. Speaking of which, even US Airways is reportedly giving American a sniff. If US Airways thinks you’re under managed, you’ve pretty much proved you couldn’t run a rental car shuttle, never mind an airline.
