By now, most of you have heard of the choice little asset listed in American Airlines’ bankruptcy that is a house in London potentially worth $30 million or more.  The townhouse has been used over the years as a place to stay for executives and has occasionally hosted AMR events as well. 

To say that most found it objectionable would be an understatement.  American points out that it bought the place for considerably less and many years ago.   All very true but considerably less was apparently $13 million and it does point out a disease that many companies and especially airlines often get.

There has been a growing opinion that airline executives are underpaid compared to other industries and that is quite true.  What doesn’t get spoken very often is that one could argue that those other industry executives are likely *overpaid*.   It’s thought that talent follows the money and while I think there is a grain of truth there, I would argue that talent chases the challenges far more than the money.  Airlines present a set of challenges that are addicting for the management executive.

Here is my objection.  No company, airline or otherwise, needs to own a townhouse in London for occasional use costing millions.  Just as no company really needs to own Gulfstream jets.  $13 million can pay for a lot of nice hotel suites for executives and for a lot of hotel banquet area for events.  To have continued to own that property prior to bankruptcy or even prior to 2002, really is insulting to both shareholders and employees. 

What’s more, it makes one wonder what other dirty little secrets there are about extravagance with company funds.  I’ll point out that $30 million can almost pay for a 737-800 at the prices American was paying.   Furthermore, it lends credence to labor unions and their claims of executives lining their pockets.  Where that is true, or not, isn’t the point. 

Owning that property wasn’t very transparent or responsible on American’s part.

Filed under: Airline News by ajax