During the internal “State Of The Airline” question and answer session following the American Airlines second quarter earnings call (a recording of which was reviewed by View From The Wing) an employee asked about recognition programs about adding in free travel in a way that might cost the company ’80 confirmed tickets per year’. For context, American Airlines flies over half a million passengers per day.
And CEO Robert Isom laid out the reason he doesn’t like offering free travel as a form of compensation for employees – which might be surprising since he leads an airline.
I think it’s also important for us that when we talk about recognition and compensation, you know at the end of the day I’d just love to do everything in dollars and cents to the extent possible. When we use travel in some circumstances to say this is a prize for doing something, you have to realize that it costs the company money – and quite often more than the value that you would ascribe to it.
Let’s face it… If I wanted to buy a flight to Rome non-stop tomorrow, what’s the going rate right now? Probably about $2,000. Unless you feel you’re getting $2,000 I’d rather just go sell the ticket and figure out a different way to compensate and reward and encourage.
So I’m not saying we’d never do free confirmed space travel again, but I do have to tell ya that when we did it for the Air Transport World recognition in 2017 we weren’t talking about a tens of millions of dollars type overhand for the company, we were talking about something that cost hundreds of millions of dollars. So unless we value it that way, we probably ought to figure out a different way.
I don’t want to pour cold water on something, but it’s something I feel strongly about. That travel that we provide to our customers, we charge them a lot. They pay us accordingly. We just have to treat it as though it’s the same thing as money.
In 2017 American Airlines was named Air Transport World Airlines Of The Year and in recognition gave each employee two positive space passes for travel anywhere in the world. Isom, who was the airline’s President when that decision was made (Doug Parker was Chairman and CEO), wouldn’t do that again.
- When someone values the in-kind item more than it costs, provide the in-kind item
- When someone values the cash more than the in-kind item, provide the cash
Taxes sometimes influence this. For instance, we don’t just provide health insurance through employment in a majority of cases in the U.S. (economical to purchase as a group, adverse selection helps explain why Obamacare needs provider subsidies) but also because it’s not taxed the way payroll is.
If the airline wants to provide travel in a way that costs them less than the value consumers and employees ascribe to it, they should consider awarding AAdvantage miles for trips. The miles cost the airline perhaps 72 basis points but can be worth twice that to a traveler (or more).
Years ago I had an employee ask me to consider paying for gym memberships for all staff. I reframed the ask, suggesting to him he wanted:
- Everyone to get an across-the-board raise
- And tell them there was only one way they’d be allowed to spend that raise?
People like stuff for free, but nothing is actually free, and are probably better off most of the time with the monetary equivalent. In other words Robert Isom is right. Of course some people don’t actually want their freedom in practice, or to think about tradeoffs and decisions. So gym memberships and free tickets are better, because they’d like to think that those things are free.
I worked at AA 1986-2001. Bob Crandall knew how to run an airline and treat employees well.Unfortunately, the current regime has no idea how to treat anyone. Customers and employees.
An airline is a very labor intense service that needs quality labor. It will never be high pay for most of the workers so the only incentive to stay is the flying perks. If American doesn’t treat their labor well, they will go elsewhere or not be very productive. AA already has a history of treating labor bad so this isn’t new. There are 2 ways to motivate emplyees. One is to hold a carrot on a stick in front of the employee, the other is to beat the employee with the stick. Guess which one makes better workers.
“Will” would use the latter as does the current CEO of AA.
Apparently an overpaid CEO with free flight benefits doesn’t understand how majority of his workforce is compensated. Outside of pilots and mechanics most of the companies flight related personnel are paid like crap. The free flights are why people work for the airlines! Paying ground crew barely over state minimum wage is not going to keep any staff. Be prepared to drastically up wages and pass that on to the traveler or you’re not going to have employees.
I never got to use my positive space tickets, and they didn’t roll over to the next year. So much for that perk.
What an absolute joke. It’s the dollars and cents, profit at all costs that is threatening America as more people reject this idea and instead turn to the worse idea of socialism. As another post said, many of the people working for airlines do so solely for the flight benefits. It certainly isn’t because they are well paid. Also as others have said the employees are flying stand by and not taking any revenue away
Isom is absolutely clueless. Take the space-available travel benefit and people will leave in droves.
As a “above the wing” employee, Mr. Leff needs to stick with his “view from the wing” and leave employee travel benefits out of his blog. As it is, many employees from passenger service and lower level manager get paid terrible wages as compared to the competitors. If Mr, Leff cares to write about employees perhaps he should write about how terrible the wages are and the fact there is no life work balance for said employees. We are the individuals on the front line through the late nights figuring out how to get revenue passengers to their destinations when inventory has been depleted and there no availability for days on end.
For those of you who feel employees don’t deserve the benefit of NRSA flying, perhaps you stop and think the majority of employees are only working this industry for the benefit and have other full time jobs which actually pay the bills. So, go ahead, take away the benefit or put your stamp of disapproval on the benefit but understand, if it were to happen 80% of the workforce would walk and you’d have nobody willing to put up with the level of abuse we undertake from passengers. Without us and the minimal benefits we do receive, not one of you will be going anywhere anytime soon!
If you want a fine example of how easily it is to hire, train and retain employees, let me offer you a spoon full of borax to help the medicine go down. Prior to the start of summer travel, which was projected to be one of the busiest in the history of this industry, major hiring campaigns took place and how did they sell people? Flight benefits! How many of those people do you think walked because once they got on the floor and realized the abuse not only by the passengers, but also the company was too much to handle. Of all the new faces, there are only a handful left because they realize the flight benefit isn’t all it’s cracked up to be.
Go ahead, do it and watch what happens. Without passenger service, nobody else can do their jobs. The baggage handlers have no bags to load, the flight attendants have no passengers to serve and the pilots are flying empty planes just to retain gates at airports.
Perhaps those of you speaking about what you don’t know should stick to speaking of what you do know and that includes Mr. Leff.
It’s as if no one today is taught the basic economic principle of “there is no such thing as a free lunch”.
Everything has some cost associated with it, you just have to figure out who in cases of “free”.
Also, we Americans love to use euphemistic terms to hide what they really are.
For example, we should call them “lazy stores” instead “convenience stores” which hide the fact you’re paying a price premium to save the effort of finding a cheaper alternative. America, where marketing is king.
Noone would take the daily abuse with out travel benefits.
You would be hard pressed to find tolerate ppl to even listen to the rude comments made. They should offer hazard pay!
1. Many are conflating Non Rev with positive space benefits.
2. Positive space as an incentive may cost less than a raise. A raise does not insure better productivity as does an incentive and its permanent vice episodic.
You need to explain to your reader’s the difference between confirmed seat “free” tickets and standby “non-revenue” tickets…….I don’t think any employee would care much if they converted the minimal amount of “free ticket” value to cash compensation, because that’s not the real benefit that everbody cares about. The real benefit that has real value to the employee is non-revenue (standby) travel.
Mr.Isom,
Who are the ones that have to face the customers when their flights are delayed? When their flight are cancelled? A lot of IROP lately,yet, you can’t always blame Wx or ATC.Just plain old shortage of front line staff,while making excuses.And in the meantime the whole AA corporate world is either nice,comfortable and cozy ,at home or at their Corporate HDQ all inclusive resort.This up side down Corporate World pyramid is very obvious.Now you have to bring up non rev travel? You want to nickel and dime us more?Really?
For people who travel all the time for a living, traveling more may be the last thing they want to do with their time off. No wonder they don’t “value” this benefit. They should be compensated with cash so they can use it to buy whatever they do value. Unfortunately, cash is taxed to both the employer and the employee so it would take a lot more cash to purchase the same travel benefit.
I suggest Isom to start with revoking free travel for all AA C level executives and also his former boss Doug – they do make sufficient amount of money and can afford the last minute trip to Rome.
Also, a good strategy is to charge some sensible amount for such trips – let say $500 for confirmed space (or 75% off whatever AA is charging that day). This way the seat is not free but the discount is still excellent.
Isom makes about $5 million a year. Parker earns over $6 million a year. Plus stock awards. Each also gets over $17,00 in flight privileges a year. Their CEO is paid 70 times more than the median salary of AA employees. Typical overpaid executive cheapskates. And people wonder why unions go on strike. It is all in the AA proxy statement:
https://www.proxydocs.com/branding/965250/2023/ps/62/
This is humourous, coming from the dudes who fly the residence on Ethihad or first on Sing by playing credit card points to your advantage. At least we actually work for the airline and get your butts where they need to go. You can’t have all the fun.
Maybe offering points at different redemption levels, like a credit card Company. So, if cash is your thing, it can be redeemed at X, travel can be X+50% and so on. Of course, it would probably convert to taxable income, so… .Anyway, just an idea.
Would be interesting to know what percentage of AA employees that actually used the 2 positive space award A7 tickets. Probably the same percentage that redeemed those useless Take Flight Certificates. I know may employees did not use their A7 tix.
Oh! And there was that one New Year’s Day US Airways flight from CDG to PHL from Terminal 1 (before last year’s revamp) when Doug Parker and family entourage showed up unexpectantly for the flight and the CDG airport staff “cleared” paying passengers out of business class (US Airways “Envoy”) to accommodate his wife, kids (his son strewed crap all over the J section before takeoff), and the rest of his retinue. Needless to say, there was a near riot and every non-rev hid their employee badge. Isom can keep his comments to himself. Delta seems to be able to annually give its employees bonuses and you never hear DL b*tch and moan about employee travel.
I guess we all have forgotten that scandal when AA employees were delaying the departure of revenue flights for AA excs and/or their spouses that were habitually arriving late to the gate.
You would think that Isom would be focused of more fundamental issues (network, widebody planes, service level). Those A7 tickets were a one off years ago. Why on earth is he still perseverating over it?
I’ll perhaps have some respect for Mr. Isom and his cronies when they stop flying on positive space free tickets and fly standby like the rest of us who keep the airline running. He’s a hypocrite.
CEO doesn’t own AA so he can go pack sand on his thoughts of taking travel away from it’s employees management and workers
Does the hypothetical across-the-board raise happen, though? Why that instead of merit raises? What’s wrong with giving employees access to unsold seats? This guy ought to focus on keeping the airline out of the news with its frequent negative stories instead of taking things away from employees. .
H a rd to have a clue when you are so disconnected from labor and reality for everyday people.
Of course Mr. isom and his family fly positive space any time they want.
Does Mr. Isom pay for his personal travel flights? Are they commercial or on a private jet? If he pays for travel on his airline, then fine. He wins the argument. If not, he is a hypocrite.
Lots of commenters are getting far afield from the issue addressed by this article: positive space tickets.
The employees always have and will continue to enjoy their nonrev/standby benefits. Understanding this would remedy much of the outrage being expressed.
Isom is clueless; that’s why Americans ratings are so low. Having flown as a captain for them for 42 years, I can tell you the last thing i want to do is get on an airplane on my days off. Certainly not standby. Give me the cash instead of a free ticket to some place I have been to a hundred times. Contending with the greyhound crowd on airplanes is not my idea of fun. People behave like a bunch of 5 year old’s anymore on airplanes. They should also ban all alcohol on airplanes- and terminals for that matter
It’s amazing how many people who are commenting here haven’t read the article. This article is not about taking away nonrev travel benefits. It’s about the confirmed travel tickets that AA gave to employees in 2017. It cost the company hundreds of millions of dollars, and he’s saying that AA won’t do that again. He said nothing about nonrev travel benefits.
Learn to read, folks.
BTW, I used my 2 confirmed tickets to take my close friend to Italy. We loved it!
Imagine Delta was able to give its commuters POSITIVE SPACE(free tickets ) for 2.5 whole years ,yet Mr.Isom has found a way to dumb down giving it once as an incentive . His Monterey value for those tickets will be no more than $700 . We see how much they gave their employees for profit sharing. Now I see why American Airlines workers are so nonchalant and salty at work .
I left AA in 2015 at the beginning of the disastrous merge and have no regrets. AA was like the debutant- well mannered and always friendly. USAir was like the roller derby – rough and gritty. It is sad to see the decline of a once great airline run by regional mentality management. I now use Delta for my travels since AA is unreliable and downright nasty.
We are abuse by passengers, management and supervisor in that order. AA lies to the Federal Aviation. About delays. They leave people behind including standbys just to meet their goals.They care about numbers. We get abuse verbally and mentally every single day. We do things that we are not suppose to do just to send a plane on time. We are required to work under pressure with not tools. We need to apologize for their lies about weather or mechanical. We stand 2-3 hours in a gate getting verbally abuse, but hey we do have the benefits right? Not even that because they are overbooking the flights so we can’t get on. We get assaulted, people spit on us, or they scratch our hands when giving their boarding passes or by checking their bags. Is so many things that we have to deal with it for someone to take that little perk that we have. 14.65 per hour is nothing!!! Checks every other week are about 600/700 so yeah we don’t live on that.
Non-rev tickets are not free.
Employees still pay a reduced price.
Then let the employees accumulate frequent flyer miles.. Corporations do it all the time for their employees.
Or how about pay your Flight Attendants a living wage and for boarding? Corporate Greed
I think many people are misled into what some of these folks make. So I do not sound like a hypocrite, I am a former ramper and my wife, two brother in-laws, and a lot my friends are all ramp agents for AA. They are senior employees and they all make $35/hr in a West Coast hub. None of the salary websites are remotely correct for pay, you can google their union site (IAM141) and the 2020 contract is publicly posted for all to see. Ramp agent wages start at 15 and go to $34.96/hr after 12yrs. Add in very affordable insurance, 401k matching, free standby travel, free community college tuition (via union), a pension, retirement benefits and you are far from the “minimum wage” references some have mentioned in these comments.
The free ticket was a one-time deal and was a cool thing and everyone would love to see it return, me too, but with my family averaging 73k/yr each before differentials and OT, I think they agree with their CEO, put the money in my pocket and let me decide where to spend it.
Retired from AA after 35+ years and many mergers. They asked me to stay several times before I finally pulled the plug. If they think they have problems getting people to come work for them now go ahead and take travel benefits away. It’s not like they are giving anything away. You only get on if the seat is open & not sold.
Free travel is THE ONLY REASON that people go to work for the airlines. It certainly isn’t because of the sub-market wages. The intrinsic value of this benefit has been decimated due to eecent Management policy decisions – particularly allowing passengers to change flights and standby any flight they wish at absolutely no charge. While we are in business to sell seats – it has gotten so bad that employees cannot actually USE their travel benefits and that is a real problem and one of the reasons employees are so upset and taking Strike votes.
It’s not just about pay. I am shocked that the airlines are even able to hire people today.
Disagree, this isn’t a gym membership that some people could care less about and will never use. EVERYONE that works at an airline does so to get free travel. In this instance if he’s saying the 2k value is not perceived as such, and that’s likely correct, is he willing to give the 2k in cash? Or more likely just an excuse to not give the seats, and then do $50 Visa GCs? I know where my money is
What a load of horse crap!!! This greedy AF guy made $5 million dollars last year and gets to fly himself and his family all over the world for free. Using his example of a ticket costing $2,000, if he implemented the requestor idea all it would cost American is $320,000 for two tickets for 80 smployees. Considering a large number of people never take advantage of these type of perks and another portion probably would not use the maximum, instead opting to fly a short distance to visit family, the total cost would probably be a lot less. Just another example of an out of touch “Let Them Eat Cake” CEO.
Perhaps Mr. Isom should be paid in AAdvantage miles instead $$$$. Put your miles where your mouth is.
Isom needs to put his money where his mouth is and set an example starting with eliminating free leisure positive space first class travel to not only senior management, but their dependents and Board of Directors as well. As is the usual case coming from a “bean counter” his numbers are grossly inflated to justify his position, especially since I seriously doubt he has any actual data on how many, if any, revenue passengers got displaced.
Space available travel by airline employees and certain relatives, including the employee’s parents, are not taxable to either the employee or the airline. Congress has confirmed this. Positive space travel by employees may be different, but as far as I know is still not taxable because it is considered to create de minimus expense to the airline. But for Mr. Isom to come right out and say that there is a cost to his company associated with positive space travel by employees is begging the attention of Congress to make this travel taxable. Is Mr. Isom actually an employee of the airline, or is he an employee of a parent company? If an employee of a parent company, his travel would be taxable to him, but probably, if treated like travel for Board of Directors in the past, the income tax amount would be paid back to him by the company.
AA uses employee travel “privileges” (never to be confused with benefits) as an excuse to pay its non-Union employees 50-100% less than other companies yet they only get on flights if there is empty space. Employees and retirees using these privileges never take these seats from paying passengers. I was laid off from AA due to Covid and my “severance” was to be able to use these so-called privileges for a few more years. Meanwhile, I didn’t see a dime of the bailout money AA received to help with living expenses when I lost my job. The bright side being, I get paid twice as much now and I don’t have to work for a company like AA which doesn’t value their employees.
Screw y’all and bring it on. “And he’s right”!
85% of AA employees will walk away, retire, and be done. Enjoy your cancellations, delays, and inability to check your bags. Have a blessed day!
Geez, he didn’t say anything about taking away flying benefits he is referring to space positive travel. I guess if you are not an airline employee those 2 VERY different types of travel could be confusing.
Standby travel will always be the amazing perk that it is, getting to stand and wave bye bye, as the full plane pulls away.
Just kidding we get on sometimes .
Yeah, give them AAdvantage award miles but be prepared for the screams and backlash when the employees find out how many tens of thousands it takes to get anyplace internationally anywhere on the dates they want.
I recall the story of factory workers overseas destroying a train full of GE refrigerators because they were building things they didn’t have. Flight benefits suck today. Good luck getting most places if you are non rev. I think it goes without saying that most people expect the direct benefit of the thing they do for a living. Duh.
Maybe I’m misunderstanding the article but I think they’re talking about confirmed travel benefits , not non revenue travel benefits. I believe he means not giving away confirmed space travel as a way to compensate employees. I don’t think he’s talking about the non-rev travel benefits, but again maybe I’m misunderstanding
Maybe I’m misunderstanding the article but I think they’re talking about confirmed travel benefits , not non revenue travel benefits. I believe he means not giving away confirmed space travel as a way to compensate employees. I don’t think he’s talking about the non-rev travel benefits, but again maybe I’m misunderstanding
There’s no FREE FIight in an airplane. Every pound carried costs a certain amount in fuel. when I worked in circa 1975 it was every 100 Ibs weight on 3-hr. flight cost 13 lbs. fuel. Not that much anymore but still significant. $/gal. much higher now.
Bring back the D2s for the retirees.
Perfect example of CEO Isom being out of touch with his employees!