Things Change, Part I

The Death of Shared Sacrifice

Those of us who have been around awhile are familiar with the lamentable refrain “things change.”  This catchphrase has become symbolic of AA management’s troubling tendency to turn their backs on prior commitments.

Regrettably, the concept of shared sacrifice and shared reward is now dead.   Despite their protests to the contrary, senior management abandoned “Pull Together/Win Together” when they succumbed to temptation and rewarded themselves ahead of everyone else who made American Airlines’ recovery possible.  By their actions, management has demonstrated that a new paradigm is now in effect – demanding and extracting immediate value for one’s contribution to the success of American Airlines.

A number of events transpired last week that should leave little doubt that management has taken a new – or perhaps, old – course for the future of labor relations at American Airlines.  Some of you expressed hope that management would come to understand the damage already inflicted, and that they would make an attempt to return to the fundamental principles of a true collaborative working relationship with labor.  For the past several months, your APA leadership has pursued numerous opportunities, both publicly and privately, both directly and through intermediaries, to communicate to all levels of management that virtually all of the positive strides they have made in improving labor relations since 2003 have been undermined and virtually destroyed by their recent actions.  I see no signs management either understands the impact of their current behavior or desires to change.  Sadly, the grand “experiment” to remake the corporate culture and labor relations at AA has been sacrificed on the altar of management greed and arrogance.

Last week was illustrative of management’s utter disregard – if not contempt – for the value of employees’ ongoing sacrifices.  AMR revealed that CEO Gerard Arpey would receive a 23 percent increase in his base salary.  In addition, AMR granted a number of top executives new rounds of stock-based incentives that may increase their total compensation substantially above amounts received in the past.  The fact that these awards were made in the immediate aftermath of AA’s attempt to improperly bestow hefty cash bonuses in violation of our contract is a clear indication senior management has placed themselves on a separate path from line employees.  Some managers defend these increases as suitable reward for American Airlines’ greatly improved performance over the past few quarters.  This perspective was echoed in a recent article in The New York Times  titled “Anger Management”:

Executives were unapologetic about the bonuses, and it became clear that management and labor — efforts at collaboration aside — live in very separate worlds. Bob Reding, a senior vice president overseeing pilots and maintenance, collected $1.6 million under the bonus plan. He said American’s brass is underpaid and the company is in danger of losing its best talent. “I am sure we are all getting calls from headhunters,” he said. “Why did people get upset? It’s because they don’t understand management compensation. None of our investors were upset.”

Mr. Reding is not alone. Daniel P. Garton, an executive vice president, collected about $1.9 million and said headhunters call him, too. “And I obviously answer the phone,” he said. “There are days when the executive compensation issue becomes a little overwhelming. Why am I doing this?”

Mr. Reding couldn’t be more incorrect or misinformed.   The pilots of this airline do understand fair compensation.  We also understand when the rules of the game have been changed.  As we move forward, the relevant issue is not whether any of AA’s senior managers are worth the compensation packages they have been granted. The relevant issue for individuals such as Bob Reding, Dan Garton, Jeff Brundage, Mark Hettermann and yes, even Gerard Arpey, is the damage their increasingly disconnected compensation strategy has done to our company’s labor relations. If certain vice presidents are feeling overwhelmed by defending their compensation, we have a solution.  The next time a headhunter makes you an offer of other employment – take it!   

During the 2003 contract negotiations, management built their case for deep concessions and bankruptcy avoidance upon the premise that all employees – management included – would need to exercise restraint during the term of the agreements while AMR put its financial house in order.  Management’s restructuring model was constructed, in part, around the expectation that all employees – management included – would receive the same 1.5 percent annual increase in base compensation during the recovery period.  Additionally, our contract placed limitations on the form and amount of executive bonuses.  Finally, it was understood by all participants that a time would come when both union and management employees would rightfully expect to share in the recovery as American Airlines returned from the financial brink.  Management cannot now make a grab for “their” reward and expect everyone else to quietly stand by.

In a separate news article published last week, AA spokesperson Sue Gordon was quoted as saying it was “way too early” to talk about whether pilots might see any boost in compensation in their next contract.  Again, I disagree.   In light of management’s new-found focus on increasing their own compensation, Ms. Gordon’s words ring hollow.  Management has already determined the time is ripe to increase their pay.   Thus, it is way past time to discuss the financial return on the investment our pilots made to help keep American Airlines out of bankruptcy.  AMR shareholders have seen their stock more than double over the past year.   Management has already paid themselves nearly $100 million in bonuses, and they have set themselves up to receive hundreds of millions more in coming years.  The pilots of American Airlines will not be left behind.  If management wants to discuss their issues in upcoming Section 6 negotiations, then they must be ready to discuss our issues – and improved compensation will be at the top of the list.

Finally, in what I consider to be one of the most condescending and rambling communications from a Vice President of Flight I’ve seen during my 20 years at American Airlines, Captain Mark Hettermann recently announced the establishment of his “Operational Excellence” program. This program will “reward” pilots for their sustained sacrifice and everyday professionalism with a nifty lapel pin and kit bag sticker.  In a rather transparent attempt to defend his own six-figure bonus, Captain Hettermann has vigorously argued that senior managers need millions of dollars in bonuses to keep their head in the game.  In a display of blatant hypocrisy, Captain Hettermann now appears to believe our professional pilot corps can be mollified with trinkets and gold stars.  I have yet to hear from a single chief pilot or check airman who thinks this “pins for performance” program is a good idea.  Is Captain Hettermann – who no longer flies the line – completely out of touch?  You decide.

I won’t insult your professionalism by asking you to paste a “gold star” on your uniform or kit bag after successfully completing a check ride.  Each of you performs an outstanding job every day and you know it.  Like all of AA’s line employees, you have shouldered the burden of an increasingly lean operation as this airline clawed its way back from the brink of bankruptcy.  Pins, stickers, get-well cards and thank-you notes are completely inappropriate forms of repayment for your continued service and sacrifice.  Instead, your APA leadership will work tirelessly to secure the contract you deserve.  Until then, if anyone from the Flight Department hands you an “OE” pin, please respectfully hand it back and state that you deserve financial restoration commensurate with what senior management has so far reserved for themselves.

I will have more to say in a subsequent message.