I saw a story on Slate.Com about a rant regarding reclining seats on aircraft. It’s an issue near and dear to my heart.
Many airline industry enthusiasts defend the airlines when it comes to offering reclining seats. This camp makes the specious argument that the seat is paid for so the passenger can do what they want. This argument takes place on airliners owned by Ultra Low Cost Carriers such as Spirit Airlines as well as SuperLegacy airlines such as Delta.
Some can’t understand where the problem really came from because it wasn’t a complaint 20 or 30 years ago. It really wasn’t. Of course, 20 or 30 years ago the seat pitch in economy seating wasn’t an average of 31 inches either. It was actually as much as 34 or 35 inches or roughly about what Economy Plus is being offered as today.
Another area where the argument gets lost is the different experiences that different people have with reclining seats. Shorter people tend to not notice it nearly as much as taller people. I’ve actually had women tell me that they find it more intrusive because they have breasts! The truth is that even one inch can change a seat experience entirely.
What I find miserable on an American Airlines aircraft (31″ of seat pitch), I find perfectly acceptable on a Southwest Airlines aircraft (32″ of seat pitch). Yes, one inch makes a big difference to many people.
Should seats in economy class be stopped from reclining? I think they should. We’ve made the seating area so restrictive at this point that people taken as a whole group will be more comfortable and less contentious on a flight with the recline feature disabled. Leave it on Economy Plus seating but remove it from Economy seating. In fact, design and buy seats with the feature never existing. I suspect we’ll seat a weight savings that is significant enough that with 137 economy seats on a 737 with that feature removed will translate into real annual savings on fuel.
More importantly, we’ll see fewer conflicts and fewer bad attitudes. Most of the conflicts I witness onboard an aircraft center on someone expressing their perceived constitutional right to recline a seat in the back of the airplane. Reducing conflicts onboard an aircraft are very important, in my opinion. Remove the flashpoints of contention and you potentially raise the perceived service experience.
One other thing: You didn’t pay for the seat on the airplane. In fact, you simply contracted with the airline to transport you from point A to point B. The next time someone expresses their discomfort with your reclining your seat, show some polite consideration instead of being a snarling jerk. It’s not the way you would have acted in virtually any other place so why act like that onboard an airplane?
This has absolutely nothing to do with the airline industry. It does, however, have everything to do with aviation. James May Toy Stories builds a large glider and sets a record and does it while having great fun. Enjoy it, I did.
The US Airways / American Airlines merger should inspire Southwest Airlines to search for opportunity in this union. Southwest’s ability to do business in the Dallas Fort Worth area has been constrained by American Airlines for more than 20 years.
The argument that Southwest has rid itself of the Wright Amendment at Love Field may come to mind, I would argue that they remain fairly constrained at Love Field and particularly so when compared to other high density metropolitan areas such as Chicago.
For instance, the maximum number of gates at Love Field were reduced from 32 to 20 and Southwest is limited to using just 16 of those gates. The other 4 go to SuperLegacy airlines (of which American Airlines is one.) Furthermore, if Southwest were to introduce any services at DFW airport, it would lose gates at Love Field.
It’s a deal with the devil that got made because of political considerations instead of reality. I wouldn’t criticize Southwest for making the deal but I would urge that the deal be revisited at this point.
Frankly, I would urge that Southwest being penalized for instantiating services at DFW be changed. The truth is that Southwest has been boxed into this area for decades and while a successful strategy for Southwest, it has impacted competition in the DFW area. American Airlines owns DFW as an airport like few hubs are.
Southwest is now seeing competition from both ULCC carriers such as Spirit and SuperLegacy such as American Airlines. It fills a niche that more would like to enjoy. But the idea that people in Fort Worth avail themselves of Love Field for Southwest fares is a bit amusing to me at this point. They just don’t.
The legacy airline playing field will be leveled with this latest merger. In fact, 4 airlines will dominate the landscape when it is completed:
Delta Airlines
United Airlines
American Airlines
Southwest Airlines
I think it’s time we stop listening to the economic arguments made by the first 3 now that they all enjoy costs that are as low or lower than Southwest. Instead, let’s start promoting competition between those airlines like we never have before.
When Tom Horton leaves the merged American Airlines Group in a little over a year, he will leave with just shy of $20 million in compensation. Half of that will be cash, half will be in stock. Between now and then, Horton will continue to serve as CEO of American Airlines until the merger deal closes in about 6 months or so. His duties will include preparing the company for integration and providing leadership on merger activities as well as being a careful conservator of the business itself.
After the merger deal closes, Doug Parker will take on those responsibilities for the combined airlines will operate as American Airlines Group. Horton will continue on as non-executive chairman of the board for American Airlines Group and serve in that role until the first annual shareholder meeting after that (expected to be May 2014.)
Horton has served as Chairman and CEO of AMR for just over a year to date. He has arguably done a very good job on the cost restructuring of AMR during bankruptcy. He has basically served best as the man he is: an excellent CFO.
A $20 million kiss goodbye is too much. The rewards here are inconsistent with length of term and inconsistent with his role in the merger. I strongly suspect this merger took as long as it did because the AMR board has been pushing hard to compensation like this for Horton and others.
This deal is also a bad example to be set for unions who just got beat up very badly in the bankruptcy process. It’s a bad example for all employees and it will be very hard for them to swallow this, I think. Sorry but when a company has entered into bankruptcy and you had a role in that direction (and Horton did have a role in it), you shouldn’t be rewarded this way for brutally abusing both creditors and employees to reposition the company. Bankruptcy means you are unable to pay your debts and need to reorganize yourself to do so. Let’s not forget that.
High compensation should come after successful performance of the company. That period of performance should be between 3 and 5 years after the merger. I think this compensation will badly hurt feelings among the unions and potentially put Doug Parker in a very sticky place on his first day as CEO of the new company.
And, frankly, I think there is too much credit taking and too much “setting the record” straight going on with Horton. Methinks he doth protest too much. And I think he doesn’t acknowledge his role in what happened in the first place. See this Dallas Morning News Story. I find myself asking when does someone in AMR leadership take responsibility for what has happened with employees and the company.
I also think it poor sport to publicly accuse your replacement of poor behavior on the very day your endorse his abilities.
OK, OK. I realize that the US Airways name goes away but I like the double strong US flavor in my made up name for the merger.
Many people will point out many potential trouble areas in this merger. I’ve got some that I think may get overlooked a bit in the conversation.
First, American Airlines’ employees desperately need to be focused on over the next year. This is a group of people who are very sour on their own company and they didn’t get there in a day. It is extremely rare to meet an AA employee who isn’t pretty bitter about their company, at least in private conversation.
A big part of the problem has been leadership neglect but it’s also been a lack of clear, direct communication (which is arguably a part of leadership) on a very regular basis. In fact, historically, the company hasn’t really said much to its employees unless something hit the news or something was about to look bad. I’m reminded of how Gerard Arpey would make communications that would spin the company in odd ways just before he and his executive staff were about to be awarded yet more stock options for a lack of performance.
As an employee, you can take that weirdness now and then and let it go. When it just assaults you for years, you lose hope.
So this is a chance to instill hope in these people and it’s a chance to show them that it is a new day by delivering on promises. I’m actually not worried too much about Doug Parker’s ability to do this but I am worried that between now and the deal closing (6 or more months most likely), he’ll be effectively silenced and the old regime will continue on the same path. I hope that communications at both companies are clear, concise and voiced with equal fervor and I truly hope that Tom Horton dials back his presence in this in the very near future.
There is a deal. Each party has its roles defined. Everyone needs to speak with one voice.
I’m actually not worried about how this team harmonizes the systems. I think they’ll figure that out without much problem. What I do worry about is how they create a new identify. This isn’t going to be US Airways and this isn’t going to be American Airlines and that’s that. This team has to decide what the new airline really will look like and what’s consistent with the marketplace. They have to identify core strengths and value propositions that exist today and figure out how to bind them together into a product that the customer wants.
In addition, they have to truly fix the basics of the operation at AA. There is a lot of underperformance going on and turning that around is no small task. At the end of the day, the customer wants flights that leave on time, flights that arrive on time and baggage that shows up on time. Then they want a value oriented price.
The truth is, new planes don’t fix the inability to operate as advertised. People fix that. Until the New American is operating in a consistent, predictable way across the system, leave out the branding hype.
Finally, get rid of that new branding. At least the livery. Pause *everything* in that area asap. Wait until the operations are fixed and wait until you have decided what the New New American really should look like. Then, take what’s good and go get a re-design on what isn’t.
Your corporate branding should very clearly reflect what you are selling to the customer.
I’ve been reading the news accounts of the merger announcement this morning and so far I haven’t seen anyone acting luke warm over this announcement. The usual spin is going on about hubs being maintained (probably true) and jobs being preserved (probably not as true, at least with respect to jobs in corporate or support roles) and how excellent everyone is.
One item I’ve noticed: Tom Horton seems to always refer to Doug Parker as “my good friend”. So much that I wonder if the knife is going to sink slowly or quickly into Parker’s back. It’s overdone.
Top Level Summary:
The Pilots: Yea!
The Flight Attendants: Yea! (AA at least)
Other service labor: yea!
They expect the deal to be worth about $11 Billion and it will require regulatory approval and bankruptcy court approval. It’s expected that it will take about 6 months to close the deal formally.
Tom Horton stays as non-executive chairman temporarily until around May 2014. Then Doug Parker takes over and the board member count drops from 12 to 11. AMR gets 3 board members, US Airways gets 4 board members and the balance come from creditors.
This isn’t a merger of equals. While it is a merger, it’s a merger where the little guy swallows the big guy. The advantage in this merger is that the little guy knows the big guy’s business and culture pretty well.
Now, with the deal made, there is a lot of work to be done not just in integration but in planning where to use the large numbers of new aircraft due in from both Airbus and Boeing.
There has been a lot of focus on this merger but curiously no one has noticed the potential effect on another Texas airline: Southwest. I’ll be writing more about that soon.
US Airways and American Airlines will merge and the announcement will be made early tomorrow morning. Doug Parker will be CEO and Tom Horton will be non-executive chairman of the board.
We like that they are merging but we don’t like Tom Horton’s presence in this because even a non-executive chairman wields influence and is able to engage in second guessing a CEO. Doug Parker will be doing things very differently in this airline and that’s liable to create opportunities to sow dissent.
This will create the world’s largest airline but it won’t be the world’s strongest. There is a lot of work to be done to be that airline and Delta CEO Richard Anderson is unlikely to make it easy for anyone to topple his airline.
American Airlines had 14 aircraft delayed on the tarmac at DFW airport as a result of a minor snowfall in the Dallas / Fort Worth area. 9 of these flights were American Eagle flights and 5 were American Airlines flights.
No doubt American Airlines will moan and groan over this and claim the weather precluded them being able to do anything. Sorry but when you control 3/4ths of the airport terminal capacity and it isn’t a major storm with lightning, you don’t have many excuses here.
The weather was miserable on that day. Light to medium rain fell until around the noon hour and then snow fell for several hours following that. The snow fall didn’t accumulate fast and certainly didn’t completely kill visibility. Delays such as these at DFW airport on the part of American Airlines just doesn’t compute under most circumstances. It was possible to disembark people and park aircraft. It’s notable that Christmas Day actually isn’t even a very heavily traveled day.
There is a story on USA Today’s website lamenting the disappearance of the Southwest Effect and using Atlanta and Southwest’s entrance into that market as an example of it not working anymore.
The Southwest Effect is the effect Southwest has had on poorly served markets when it has entered the market. In short, Southwest stimulated a great deal of passenger traffic every time it entered a new city and this was cited all the way back in 1993.
The problem is that the airline industry is a very different beast today. In 1993, Southwest was a one of a kind airline. By 2000, we saw airlines such as JetBlue with enhanced service products start to take-off. Others, such as Airtran, were performing their own Southwest maneuevers in various markets.
Starting in 2008, industry capacity started to contract and has largely done so for over 4 years now. Legacy airlines have gone through bankrtupcy and now often enjoy labor rates that are on par with most low cost carrier labor rates. In some cases, they’re lower.
No one has quite managed to replicate Southwest’s productivity though. Despite exceptionally high labor rates, the airline still manages to be one of the most productive in the industry and continues to keep its customers exceptionally happy.
It’s true that Southwest has evolved. It is no longer seeking to be the absolute lowest fare on the block. They’ve discovered that they can grow as the airline who offers the best value on the block. A strategy that I agree with because high value is chased by people with good incomes.
In the case of Atlanta, I think it’s silly to expect Southwest to stimulate traffic. That has been the fortress hub of Airtran for more than a decade and if there was any traffic to be stimulated by low fares, Airtran already did so. There is a reason why Southwest bought Airtran and it wasn’t because it wanted Boeing 717s.
Southwest is now adopting new strategies where I do think we’ll see traffic stimulated. Those routes are to Central and South America as well as the Caribbean. There is a reason why United (Continental) panicked over Southwest’s desire to build an international terminal in Houston: There is both traffic to be “stolen” as well as generated with that operation in an area where legacy airlines have been enjoying exceptionally high (and profitable) fares for quite some time.
In fact, if Southwest figures out this international flying and is able to manage it with its productivity needs, I think we’ll see Southwest stimulate traffic to Mexico, Central America and Canada. All markets that could use some good old fashioned competition from someone like Southwest.
Will they do so on Hawaii routes? No. In fact, I actually believe that Southwest would be better off with a code share parter on Hawaii routes than operating such routes by themselves. There is a great deal of capacity on those routes as well as a great deal of competition. Why not simply strike a deal with Hawaiian Airlines and move on to other areas that yield more traffic, more profit and offer more potential? Hawaii might have been a good idea in 2005, it isn’t today.
At the end of the day, there is something important to remember about Southwest: They aren’t in business to create cool things like the “Southwest Effect”, they are in business to earn a respectable profit. Anything that comes from meeting that goal is secondary and its presence or absence isn’t indicative of the airline. What should be lamented, if it ever does happen, is Southwest no longer providing a profit after 40 years. So far, it not only hasn’t happened but there is no evidence of a trend towards it happening.
There has been some development in the investigation(s) going on to determine the nature of the battery problem on the 787. Primarily, it is now known that the battery in the Boston 787 incident as the source of the fire in that there is a battery cell that has been identified as the source.
The battery manufacturer has been investigated closely and no quality assurance problems have been identified in their facilities.
Boeing has asked for and received permission for test flights and has done at least one successfully. No surprise there.
Let’s not forget that this airliner has been flying around in tests and for airlines for over 3 years now. While there is no doubt that a problem could have persisted through testing and introduction into service, if it were an easy problem to reproduce, it would have been a problem that came to light sooner than this.
The alarming part of the problem isn’t the whether the battery is of good design or even if the charging and control systems are the source of the problem. It’s that when those batteries go, they really go.
I expect that Boeing has made changes to controls and/or how the battery is mounted and maintained and is performing test flights with instrumentation to get the FAA to approve an interim fix. Then there will be an expectation that the battery will either be redesigned or replaced with safer technology. Both could take as much as a year to do.
Would the FAA approve an interim fix? I absolutely think so. Sadly, that decision may be driven more by economics than science which means that we’ll have some doubt about the interim fix as its deployed.
I am beginning to think that Boeing is shoving its head deeper and deeper into a hole over this problem and mostly because Boeing CEO Jim McNerney seems bent on just issuing assurance after assurance in the belief that Boeing credibility is the paramount thing to rely upon here.
Despite Boeing’s assurances that they take this seriously and are heavily engaged in a fix, I can’t escape the feeling that they’re trying hard to explain this away as opposed to performing a full mea culpa and dig in with an honest root cause analysis that serves everyone’s concerns at this point.
In fact, I believe doing the latter will cost far less over the long run than the antics going on presently.
Now the latest news has Tom Horton holding a non-executive chairman of the board position until some time in 2014 (that’s more a compromise than I expected) and Doug Parker assuming that role afterwards.
The company is expected to be valued at $10.5 to $11 Billion with about $3 Billion of that credited to US Airways. The boards of each company are expected to meet mid–week and I expect an announcement on Thursday morning by my best guess.
It should be interesting to see how much the smile on Tom Horton’s face is strained and whether or not he takes credit for the merger.
United Airlines has managed to improve its on-time rate to a record 82.8 (Domestic) and 80.5 (Foreign) for January and it’s handing out $100 bills to its employees for the achievement. Incentives such as this have been a big deal in the former Continental culture and it is nice to hear that they are being continued today within the United structure.
It’s nice just to hear United succeeding at something like this because you don’t get those numbers unless your organization is working together. Clearly, they are working together better.
Should we give Jeff Smisek a $100 bill if he turns a profit for Q1 2013?
Digging into news items more today, I have found more explanation for this desire to have Tom Horton remain as Chairman of American Airlines.
Apparently it is the American Airlines Board of Directors who are pushing for this and some even for an executive chairmanship and in the interests of “protecting” the board on the promises of revenue synergies being promised from the merger.
What’s interesting to me is that the board, largely unchanged over the last year, wasn’t pushing for this kind of conservatorship more than a year ago.
Questions I would ask are these:
Why is Doug Parker’s track record of return on investment at US Airways inferior to Tom Horton’s track record given the profits that Parker and his team have realized with an inferior airline network?
Why is it preferential to put controls on Doug Parker in this merger that we wouldn’t, for instance, put on Tom Horton himself in a stand alone exit from bankruptcy?
Why are AA’s interests valued so highly in this merger and US Airways interests so low?
As an unsecured creditor, would I not want to see the management team in charge be the people who have the best chance for success in the marketplace and who do return shareholder value since my “payback” will largely be in the form of an equity stake in the company?
And, if #4 is true, why would I want to constrain that with leadership that while fiscally good has ignored the revenue picture for 10 years or more?
I sense overreaching by the board and when I consider the composition of AA’s board of director’s, I think I know why. AA’s board is dominated by financial interests who favor conservation of capital in all situations. They are one of the most conservative boards you could find on an airline and most independent directors lack direct airline experience.
US Airways board is very different. It is seeded with airline experience, entrepreneurial experience and is generally more diverse both in geography as well as industry.
Again, let me point out that Doug Parker is no fool. He has an excellent education and has had excellent multi-airline experience which was founded on a long stint in finance at American Airlines itself and has since managed America West/US Airways for a 12 year tenure with great success in returning a disadvantaged airline organization to health despite severe industry economic challenges and ever increasing competition from very large SuperLegacy airlines. that’s the guy you bet on and that’s the guy you don’t hamstring.
If Doug Parker or his team were foolish, unwise or inexperienced, they would not have achieved consistent successful results that largely outshine the rest of the industry.
And I would remind AA’s Board of Director’s that they chose to ride the Gerard Arpey horse and they chose to ride the similar legacy in Tom Horton with the results of a company entering into bankruptcy because of an inability to lead and an inability to generate increasing revenues. The strategy was waiting for other airlines’ costs to rise and meet their own. What makes you think your entity is so much more valuable today than it was 14 months ago?
Terry Maxon with the Dallas Morning News is reporting on the Aviation Blog there that the solid rumour is that Tom Horton will be non-executive Chairman and Doug Parker will be CEO of a merged US Airways and American Airlines.
Since Terry rarely gets things wrong, I believe that this is the almost certain outcome.
It’s likely that I will take flak for this but I don’t like it as an idea. Tom Horton as non-executive chairman would have seemed like a good compromise last May or even last July. Not now.
Horton & Company have clung too hard to their ideas and I fear that even as non-executive Chairman, he’ll wield too much influence if only by being able to second guess Doug Parker and his team.
Let’s not forget that, according to Horton, Tom Horton was the guy to think of a merger long before Parker.
And then there is the branding fiasco and multiple superfluous announcements about change, often scheduled to take place in 2017 or later.
Sorry but I think Horton interferes and prevents success more than he helps. And the Board of Directors as well as the unsecured creditors would be wise to find another non-executive Chairman before letting this happen. Ask Gordon Bethune to do it. Ask Doug Steenland to do it. Ask someone else.
In fact, I think that finding someone else to serve as non-executive chairman could be the very best thing for this company. I really do. But Tom Horton should not be the one to serve in that role. He’s a lightening bolt for controversy among employees and a potential critic of Doug Parker as he sets off to do something very, very hard in the best of circumstances.
Let me point out that if it is about wanting to reward Horton for something, there is nothing preventing the company from awarding him stock and/or options in this deal. Nothing really. Horton will work again, too. He is a very, very talented finance guy and there are companies who need his skills.
It will be much cheaper to bribe him away from this than it will be to have him hovering over Doug Parker and trying to wait in the wings hoping Parker will fail and he can take control again. Seriously, don’t do this. It hurts the chances of the merged company and at best it doesn’t help.
The Fort Worth Star Telegram SkyTalk blog has a story about a bond analyst blasting the American Airlines management for their latest request to extend their deadline for presenting a plan for bankruptcy exit. In her note to investors, Gimme Credit Vicki Bryan said:
“AMR management has been coming off as more arrogant than confident, in our view, with destructive diversions and posturing that almost has boarded on the ridiculous. From CEO Tom Horton’s “revelation” back in July that the merger with US Airways actually was his idea in the first place (oh really? If so, he apparently couldn’t pull it off. See our note on 7/25/12) to the unveiling last week of expensive (and unappealing) corporate rebranding and garish new livery on planes that most likely will be owned by somebody else soon,”
This is what I mean about putting the cart before the horse in this process. There are way too many attempts to pre-emptively announce developments and changes to control the outcome. At what point does a board of directors or an unsecured creditor’s committee direct that their inclinations and desires are what controls an outcome rather than the CEO’s desires. Even if that desire is a multi-million dollar payout if they exit as a stand-alone organization.
And let me ask you this: Why should multi-million dollar payouts to an executive team take precedence over what is the right outcome for those holding AMR debt?
I found a blog being maintained by an American Airlines pilot yesterday that was quite the experience. Unlike most, this pilot was an ardent defender of Tom Horton and credits him with moving the airline forward through the large aircraft orders made and for making a case to grow the business to the board of directors all prior to Gerard Arpey’s resignation. This blogger also contends that a merger will merely bring the America West / US Airways cat fight over seniority into the Allied Pilots Association and that stand alone is a better thing for pilots. There is more there but we’ll leave it alone now.
I have a few specific and general thoughts here.
First, crediting Tom Horton with the aircraft order strikes me as overly generous. More so the financing as being innovative. To be true, things were negotiated in these orders that have the manufacturers generally providing financing for these purchases and I’m entirely unsurprised at this since the order was largely a historic one and getting a piece of it required the manufacturers to make an attractive deal. But if we’re to credit Tom Horton for this order, let’s also credit him for the company devolving into bankruptcy as well. We tend to pin that on Arpey alone and the truth is that Tom Horton was as much a right hand man in the operation of the airline (often to the exclusion of many other capable executives such as Dan Garton) and if we’re handing out credit, let’s hand out all the credit.
As for being the man to grow the airline, I would also point out that Tom Horton has possessed enough influence at the company pre & post Gerard Arpey to have already brought a great deal of influence into this direction. He did have Gerard Arpey’s ear and let’s not portray the relationship that existed between the two as fundamentally different. It just wasn’t. Again, if Tom Horton was a visionary, his vision appears to have been ignored entirely until Arpey’s departure and we know that that just isn’t true.
Let’s also note that Tom Horton served as CFO for AT&T until it was purchased by SBC (Southwestern Bell). During his time there, he essentially presided over AT&T not succeeding and needing a merger to survive and hence the merger/acquisition by SBC. It has long been said that Horton realized he wasn’t going to replace the CEO and that current CEO of SBC, Randall Stephenson, had the inside track. This in fact turned out to be true when Stephenson replaced former SBC/AT&T CEO Ed Whiteacre.
Enough of that. The truth is that as I think of the conversation as it surrounds this merger between US Airways and American Airlines, it always boils down to arguments about seniority amongst labor. I agree that integration of work forces is an important element in this merger and any other mergers among airlines. The idea that a smooth integration is the norm of a successful merger is not correct, however.
We tend to look at the Delta/Northwest merger as the way it ought to always be done. In truth, I wish it were that way but that was a very, very special case and even in that one the pilots nearly did the merger in but for the leadership of Lee Moak in that process.
In reality, mergers between airlines are almost always messy. Integration is always difficult. Successful airline mergers shouldn’t be measured in those terms. In fact, I would argue that if the merger grew the airline, its revenues and its profits after a 5 year period, it was successful. Messy or not. (You’ve still got time United but the clock is ticking.)
The labor issues always revolve around seniority and a system of union representation that dates back more than 50 years. The union system and its focus on seniority has made life exceptionally difficult for those employees for decades. Today, among almost all legacy airlines, there is no job portability. A pilot who merely finds dissatisfaction with his employer cannot leave and go to another airline without starting literally at the bottom-most rung again. This is a major barrier to portability.
And if those same employees had some portability, I think that we would discover that airlines wouldn’t be in such a bad financial position in terms of labor costs and airline employees would actually be able to “vote with their feet” when an airline management treated them poorly.
Mind you, I’m not arguing against unions. They’re the choice of the labor force. I’m arguing against the idea that seniority and job security should be the overwhelming issue in representing their interests. At the end of the day and in light of the furloughs and layoffs and ever increasingly slowed advancement that exists at an airline, is seniority really providing job security anymore? And how about job satisfaction?
At the end of the day, airline employees love their inherent jobs but they’re also inherently disssatisfied with their management, their wages and their quality of life. The roadblock to fixing those dissatisfactions is seniority. This makes me wonder when someone is going try to come up with a better model for the future.
Wouldn’t it be great if an airline Captain with Airline A could quit a bad job and go to work for Airline B and be compensated on the basis of his experience and qualifications immediately instead of having to sit at the bottom of a seniority list and forever be “beneath” his peers who started at Airline B at the beginning of their careers?
And wouldn’t it be interesting to see airlines compete for airline pilots on the basis of that experience? Remember that a desirable airline pilot isn’t just one with 10 or more years of experience. It’s a person who has shown good judgement, safe judgement, efficiency and a can do attitude. If I’m starting an airline, that’s who I want. And an airline startup can’t really get those guys. They’re stuck with the airlines they work for by and large.
Seniority imposes too much pain on both the employee and the employer at this stage in the game. It is hurting competitiveness among airlines and impacting employees/labor in a very negative way over the long term.
Alaska Airlines and American Airlines announced an expanded code share agreement between the two airlines on Monday. The focus is on American Airlines putting its codes on Alaska Airlines routes from the San Francisco Bay Area and Alaska Airlines putting its codes on American Airlines routes from the Los Angeles area.
Alaska is ready to do business with anyone that it makes sense to do business with. For them, this is about expanding options with another airlines to gain incremental benefits.
For American Airlines, this is about more than just gaining some incremental benefits. This is about expanding a partnership with an airline on the West Coast and making the argument that the current AA leadership team is ready to work on the airlines’ revenue problems with a bankruptcy exit.
The next step for AA will be announcing an expanded code share with Jetblue in the Northeast.
Will it work? Well, personally, I think not. Code shares like these are what you actually make of them. To date, American Airlines hasn’t really made much of its domestic code shares because it has always preferred to capture the all the revenue for itself in most domestic situations. They don’t mind the incremental benefit to their foreign route network and anything that puts a passenger on a flight for a good fare is OK with them but it isn’t their focus. Other airlines often try hard to drive sensible synergies with their code shares but American’s team just doesn’t seem to do this much.
Financial analysts aren’t fooled by these moves nor are those on the unsecured creditors committee. What existing creditors and bondholders want is an airline that has long term viability for realizing profits that look a lot more like Delta’s. A patchwork plan of code shares doesn’t get them there.
