American Airlines held its earnings call on Thursday. After each quarter’s earnings call, the airline’s senior executives have an employee “state of the airline.” They’ve stopped taking employee questions at this, so it’s all one-way.
The event was held in the midst of American’s operational meltdown during winter storm Fern. The airline cancelled over 9,000 flights. As other airlines recovered, American did not. The storm hit their hubs hard – New York, Charlotte, Washington National, Dallas – Fort Worth. But things went from bad to worse as the airline lost track of crews, and even when they were eligible to fly.
- Flight attendants were sleeping in airports, unable to get through to their limo and hotel desk and unable to get rooms.
- When crew did get hotels, it was often after long waits. But that information didn’t get relayed to operations, so planes and pilots were ready to go with passengers – but there weren’t flight attendants who had yet received the legally required rest to work.
- Often, crewmembers couldn’t get hold of scheduling – waiting on hold up to 12 hours (and learning that the phone system automatically disconnects them after a 12-hour hold).
So it was striking to me when reviewing a recording of the event that in his introduction acknowleding the operational challenges the airline had been through, CEO Robert Isom suggest that flight attendants sleeping in airports is what happens in storms.
- “I know throughout the rest of our system, some of our crewmembers didn’t have a place to stay last night.”
- Isom called it “unacceptable” but then he proceeded to accept it:
I also know it comes with the kind of business we run. This isn’t the only storm that we’ve ever had. It’s not going to be the last storm we’ve had.
Isom blamed his airline’s failure to earn a profit (0.002% margin) on the government shutdown costing them $325 million revenue, on the flight 5342 disaster at the start of the year, and on other airlines flying too much capacity.
Acknowledging that a lack of profits means mediocre profit sharing, he argues that American’s employees are still better off than those at United which has several open contracts and flight attendants who haven’t seen a raise in 5 years (and who have a meager profit sharing formula as a result).
He noted that 73% of unionized employees at American make more than counterparts at United: flight attendants 35%, mechanics 12%, and fleet service 6%. It’s a talking point Isom regularly offers to Wall Street analysts. In the earnings call he said,
Quite frankly, I wouldn’t be out there bragging about profitability in a hub when 80 percent of your team members make a lot less than the market rate.
But it’s a strange point to make. United benefits from lower wages when flight attendants reject a contract its union negotiated that would’ve meant higher wages. And United will be paying more in the short- to medium-term. It also doesn’t make employees happier that an unprofitable American means employees don’t get much profit sharing, while Delta employees are getting the equivalent of 8 weeks of pay. If American was more profitable, employees would be earning more. That’s why the flight attendants union called for Isom’s ouster this past week.
As I approach my 40th year in this industry and have worked under more CEOs than I have fingers and toes, (I am not missing any BTW). I can state without doubt those are the things CEOs say when they don’t have much time left at the airline. Mark my words it might be 6 months or a couple years but he will be gone soon. Don’t ever feel sorry for one they all have been narcissist to some extent over my career. I heard great stories of the early CEOs from the 50s and 60s maybe they were different back then. Now all are products of trained MBA programs. Herb Keller was the last good one we will never see those types again.
How very ivory tower of Isom.. Yes we expect out flight attendants to do everything possible to come to work when everyone else is hunkered down. Yes we expect them to work long grueling hours doing what they can with meager resources to make up for failures in other parts of the business. We value them so much we think” giving them profit sharing is not a good way to compensate them” and letting them sleep on floors is just part of the job.
his points are valid and, no, UA won’t be paying more in the short to medium term. UA has a labor cost advantage and, if AA miscalculated that signing a new FA contract would put pressure on UA to do the same, he was wrong. UA employees are simply too enamored w/ the drivel coming out of their HDQ to realize how badly they are being taken advantage of.
Yes, there will be storms but it is never acceptable for employees to have to sleep on the floor because mgmt didn’t figure out how to prepare for and execute on recovery plans.
CLT got walloped by the NC snow and it is notable that DL cancelled more flights at ATL earlier and ATL got hit far less even though ATL is far better equipped to handle IROPS than CLT. There will be endless stories of crews and passengers that are out of place in the SE for days.
the guy is tone deaf and strategically incapable of delivering a plan that works. There are people at AA that can deliver but they have been buried by a quarter century of incompetents.
Ignore the ‘business-not-charity’ tropes from the shills on here…
I’m convinced re-gressives just want to bring back slavery, or some form of indentured servitude, whereby the under-class must serve these modern-day feudal lords, all enforced with modern police-state technology.
I say, F that noise; workers and consumers deserve far better. We do not have to put up with this BS. Elect new leaders; as for AA, time for new management.
When cancelled flights happen where do you put 3000 people in a city with 1000 rooms. Tell me
Do not fly during a snow storm
I don’t see his stupid ass sleeping on the floor!!! He needs to compensate those flight attendants.
TD, “UA employees are simply too enamored w/ the drivel coming out of their HDQ to realize how badly they are being taken advantage of.”
It’s called leadership and performance. United employees understand that this is, by far, the best management team they have had in 40+ years and that their airline is thriving.
leadership is not telling your employees that they deserve industry leading compensation and then taking 5 years plus to settle an FA contract and years for the mechanics.
Just because UA was mismanaged for 40 plus years doesn’t change that UA employees are subsidizing UA’s market share and competitive market wars by being compensated less than their peers.
Isom is wrong on alot of things but he is absolutely correct in highlighting UA’s labor cost advantage which comes off the backs of 80% of UA’s employees.
“Isom blamed his airline’s failure to earn a profit (0.002% margin) on… other airlines flying too much capacity.” His other points may be valid, but doesn’t this one somewhat reflect AA’s poor planning and inability to add more capacity?
You criticized UA flight attendants for be unwilling to allow preferential (computer) bidding systems (PBS)? As Gary said it takes two to tango.
The UA flight attendants tremendous performance (see NPS) says all you need to know about how they feel about UA leadership and the performance of the airline.
Resign simple , You do not have what it takes to run a once proud global carrier. Get out.!
Numbers do kit lie DL $5 billion , UA $ 4 billion in earnings AA $ 111 million ?? When revenues were $14 billion ?? Duh ??!
Isom and his management totally failed! If you want your employees to work hard for you, you take care of them. I don’t understand how with everything computerized that you lost crews, had FA’s sleeping in airports etc. this should never happen! You needed middle management to help and step up to the plate. Take care of those that you are busting their balls for you during this weather catastrophe. Plus, you don’t come out and say the things you said, without thinking and apologizing to the cruise that were stuck, sleeping in the airport and sleeping on floors and getting kicked out of a hotel rooms.! you make it up to them you tell him how valuable they are and you’re sorry for your screw ups. I’m sorry you need to go a good CEO wouldn’t blame the flight attendants!
1. AA experienced a weather event that took out five of hubs including its #1 and #2 hubs.
2. Over 60% of the US population was impacted by this storm.
I’d question if this was a system failure or an event the system was never designed to support, a “black swan” event. Every airline has them, every airline gets skewered in the media and by the unions, and every airline recovers and moves on.
It was a very bad situation, but Isom was not wrong. This does happen and you gotta just roll with it. What matters is how we respond in the moment and after the fact. 20 years ago you could say “this is part of the job” and people would consider that. Now…forget it.
While he is right in principle that’s not what folks are saying expect to hear from a leader these days.