After five years without a contract and raise, American Airlines flight attendants have been granted a substantial raise. But if management can’t improve operations, it’s all for nought.
If you are considering booking travel or signing up for a new credit card please click here. Both support LiveAndLetsFly.com.
If you haven’t followed us on Facebook or Instagram, add us today.
Flight Attendants Earn Deserved Raise
This week, American Airlines flight attendants received welcome news that they will now earn 33-36% more. While the agreement is 250 pages long, the Executive Summary is a brisk 52 pages. Here are some highlights according to that summary:
“This 2024 Tentative Agreement adds 4.2 billion dollars in value to our contract over five years.
- Five-year duration.
- Pay scale increases of 33%-36% over five years.
- $4.2 billion total increases in pay rates, 401(k), per diem, profit sharing, boarding pay premium, retroactive pay, and other items.
- $160,000 average increase in value per active Flight Attendant over five years. Industry-Leading compensation (Average Pay + Boarding Pay).” – AFPA
The union that manages the labor group, Association of Professional Flight Attendants (AFPA), fought the airline hard for wage increases including possible strike action, and was clear with its 28,000 members and the public throughout the process.
Plainly, not only do I feel sorry for American Airlines flight attendants that they have not been able to secure meaningful contract updates over the last five years, but further, these don’t do as much as they look like on paper.
For example, official inflation rates through 2023 place a 21.8% inflation rate over the period but a total inflation number (including 2024 cumulative) puts it closer to 29%. In essence, in real dollars, this same raise in 2019 would have amounted to a 4% increase all things being equal. It’s also important to note that those inflation numbers exclude food and energy, the latter of which is up 38% over the same period.
In essence, flight attendants absolutely deserved the raise but while 33-36% looks big now it’s basically the same buying power of their last contract, likely behind inflation at its conclusion.
An added bonus is pay for boarding which is long overdue but a fantastic win.
Management Has No Plan To Pay For This Increase
The truth of the matter is that American Airlines is reporting a loss for the current quarter and while it has complained about capacity issues, it’s not doing a great deal to combat it. It reported in a mid Q2 advisement to shareholders that overcapacity was responsible for 5-6% lower revenue for the quarter and all signs point to that remaining throughout the year. Yet American is only drawing down capacity by 3.4% through December. One might have expected for American to reduce capacity by at least 5-6% to return to even capacity but doesn’t break that number until well into next year, achieving just 6.9% one year from now.
Working on Cranky Network Weekly, and I think it was United that said it was expecting big capacity cuts… well… pic.twitter.com/EZnFd3vgw5
— Brett Snyder (@crankyflier) July 27, 2024
That’s not an aggressive plan to attack the capacity concerns.
American Airlines has shown no ability to turn a profit from its core business of flying passengers and things. Its loyalty program has been the only bright spot over the last decade occasionally producing profits. The stock price is historically low (including during COVID), the company has more aircraft than any other in the world, and depending on the month, flies more passengers than any other. Yet, it’s market cap is 75% lower than Delta ($6.97bn to $28.48bn.)
Then there’s the staggering debt.
“By the close of 2019, the burden had ballooned to almost $25 billion. Due to losses not covered by the huge federal aid package granted during the COVID meltdown, America’s borrowings expanded to $29 billion in Q1 of 2021. Since then, it’s wrestled the number to $25.5 billion as of [Q3 2023]. Still, American’s carrying about twice the approximately $13 billion loads at Delta and United. (Southwest has zero net debt.) American’s also paying around $1.5 billion in interest annually, including what it’s collecting on its cash horde. Once again, its overall interest bill is about twice that of its two biggest rivals.” – Fortune (emphasis mine)
To summarize: American Airlines management has blamed its latest loss on capacity concerns but has not sufficiently lowered its capacity to meet current demand. It’s not making money right now, and yet is somehow going to absorb an additional $4.2bn in costs without any rise in revenue? The carrier made $19MM in 2023 on $53bn in revenue, but with an average of $840MM/year in new costs, how can American expect to meet its obligations?
What’s Next?
American Airlines Management is either the most hopeful, delusional, or stupid group to ever run an airline. That’s an elite group of executives. One might even suggest that it’s a borderline ponzi scheme, given that even as they pay off debt, they acquire more while there’s less revenue coming in. What happens to ponzi schemes?
It’s possible that management didn’t sign the contract in good faith. It’s possible they have no intention on honoring the length of the agreement because they will simply be swallowed up by its debt payments and a bankruptcy court will break the agreement.
There’s no question that revenge travel had to slow, that prices will have to come down, that demand will have to drop and we are seeing the first signs of that. If you can’t make it work now, how are you going to make it in a downturn with an added $840MM in costs?
There is a world in which American Airlines makes smart cuts to underperforming sectors, smart decisions in its processes, marketing, and management, and simply runs a better airline. Delta did it. JetBlue did it in the mid 2010s. Alaska seems to have created both a brand and culture that customers love while still taking on huge endeavors like its proposed acquisition of Hawaiian Airlines and its ascension to oneworld membership.
Sadly, we just don’t live in that world.
Conclusion
It’s unquestionable that American Airlines flight attendants won an excellent contract though perhaps its is mathematically less significant than advertised. It’s a huge win to be paid for boarding time (how was it legal not to do this) and labor leaders did a great job going toe-to-toe with the largest airline in the world by aircraft. But American’s management team is incapable of turning a profit most good years (2019 was the last year in which the airline made more than this single contract increase would have cost) – at the slightest downturn the entire company is headed for certain disaster. For flight attendant readers, friends, and neighbors, while I rejoice with you on this victory, it feels hollow with the same management in place. Needed as it was, management had no business in executing that contract based on the evidence of its own performance and ability to pay it.
What do you think?
I agree the USAIR guys (Robert Isom and formally Paker) are “most hopeful, delusional and stupid”. American Airlines was once a great airline before Parker arrived. The board of directors need to wake up and fire Robert Isom and the current USAIR management team.
I dont regularly encounter AA management aboard flights. I do however encounter surly and lazy flight attendants…..I’d like to see them improve first. I can only hope that this new contract brings about REAL accountability and makes it easier to shed the losers amongst the flight attendant ranks.
These articles get worse the more I read them. Kyle Stewart must be reading the VFTW comments section much…
American is not underperformed **and** has high debt.
They are underperforming **because** they have high debt.
It’s been pointed out many times, but if you don’t believe me just check the financials and balance sheets of AAL and UAL. Notice something?
And while AAL has far more debt than competitors, theur competitors have to pay a lot of interest too.
Also, the idea that the airline should cut capacity is misunderstood at worst and asinine at best.
Costs are mostly fixed in this industry, so the cost of adding more capacity isn’t actually that high. Where would you cut anyways? All of a sudden ideas don’t sound great if you have to elaborate on them. On a separate note, even if your margin is poor, you can make up for it in scale.
This so called “financial analysis” only uses a few, select raw numbers. How shallow. These are noted by airlines in their press releases each quarter too…
If an idea like bankruptcy sounds so great, why not do it already, or even betterwhy not in 2020? They have paid down $13bn in debt since their peak in 2021, which is a lot. It’s a big number.
This is not “The Office.” Michael Scott or AA cannot just declare bankruptcy like that.
Since 2013, apart from that covid period which other airlines were also impacted by, AAL have turned a profit time and time again, albeit underperforming.
To suggest that American has been running steep losses for years, is so inaccurate and wrong and borderline dangerous misinformation.