The State of AA

I’ve been on vacation since last week and while I was away, I had a peculiar urge to not blog on the airline industry.  It’s time to change that.

American Airlines’ three big unions have had votes on last best and final offers taking place with results in from 2 of them.  The TWU wisely chose to accept their offers and did so without fanfair.  The APFA still has a vote going on that will go past the bankruptcy court deadline as it stands today although the APFA remains confident that they’ll be given more time to conduct their vote.  I’m not so sure about that after the results of the APA vote.

The Allied Pilots Association has voted down their contract and this brings a flood of thoughts to my mind.  Their vote should have been about remaining unemotional.  Emotion dictated offering a big “screw you” to any contract but that wasn’t the wise choice in this vote.  Accepting the contract offers flexibility in negotiating in the future and a firm role in the bankruptcy reorganization.  With the APA holding 13.5% of the equity in the reorganized company, they had a voice that could bark.  Without it, they are relegated to the sidelines.  An emotional vote wasn’t the way you wanted to go in this.

The APA will be without voice in this process.  The bankruptcy court will impose AA terms on the APA.  The NLRB will not release the APA to take industrial action against American Airlines for years more now.  They’ll insist on more negotiations and even arbitration but they won’t let the APA strike.  AA now has zero incentive to do a new deal upon exit from bankruptcy and zero incentive to cooperate in negotiations as the longer they have their terms in place, the better the costs.  My best guess?  The APA has screwed itself for at least 5 years from the date of bankruptcy exit.  They will not be getting a contract that has parity with United and Delta for a long, long, long time.  They will have little influence on a merger, if any.  The AA executive team no longer need even pay much lip service to the APA.  In short, they not only shot themselves in the foot, they shot themselves in the head.

Am I surprised?  Actually I was.  Why?  I cannot say.  The truth is that the APA is not a rational organization and it has been mad and throwing temper tantrums for years.  When former APA President Lloyd Hill was in charge, nothing got done but pilots got to complain loudly and throw temper tantrums and that felt satisfying.  Then David Bates was elected and elected on a platform of approaching negotiations with AA rationally.  More surprising was that David Bates and his fellow officers actually did approach their jobs in the union rationally.

So rationally that I forgot about the overall APA membership.  Oh, there were hints from time to time.  Board members from various pilots’ bases would from time to time throw wrenches into the carefully plotted course charted by Bates but Bates seemed to manage this pretty well and keep some forward progress going.  So well that I started to not pay attention to those renegade board members.  Bates has done an excellent job of putting smart before emotional.  Sadly, pilots don’t want smart.  They want emotion.

So Captain David Bates has resigned as President of the APA.  The vote against the contract really was a vote of no confidence towards him and his fellow leaders.  Bates did the right thing because going forward, he wasn’t going to be an effective leader.  Why remain in office as an ineffective leader?

Pilots are weird creatures and their unions are stranger.  They will, at almost every chance, cut off their nose to spite their face.  They believe themselves smarter than anyone else at the airline and always believe that if the airline would just do what they, the pilots, thought best for running an airline, the airline would thrive.

The problem is that no pilot has ever proved themselves to be an effective airline executive in modern times.  To the contrary, most have failed miserably.  You can’t “control” an airline.  You can manage one, lead one but you can’t control it like you do an aircraft.  The airline will provide violent feedback and eject the person trying to control it.  It’s not an inanimate object designed for steering inputs.  It’s living creature with a mind made up of all of those a part of the organization.  It has to be persuaded to do things, not mandated.

The arrogance of airline pilots is nothing new in this area.  The greed isn’t either.  I am reminded of when Braniff International went to its pilots for temporary cost reductions to keep flying.  My father was the man who approached them.  At that time, senior Braniff captains were earning as much as 5 times more than my father, one of two executive vice presidents.  When asked for reductions to keep cash flow positive, the pilots refused and then offered to just loan the money to the airline via the union and at interest rates above market.  Obviously more loans weren’t the solution, Braniff management walked away shaking their collective heads and eventually filed bankruptcy.  And never flew again.

All the pilots lost their jobs, had to start fresh at new airlines and at entry level salaries.  When the bankruptcy occurred, I remember many pilots stating private (and some publicly) that they never thought the airline would actually stop flying and cease to exist.  They believed they were calling a bluff on the part of Braniff management.  Many deny it now but that wasn’t true at the time.

AA pilots are a very similar breed.  These men and women are going to eliminate their jobs to spite CEO Tom Horton and other AA executives.  The thing is, those people will find other jobs and they’ll go on to succeed elsewhere and earn great salaries in industries that pay far better than airlines do.  (Airlines are notorious for underpaying executives relative to businesses with similar revenues.)  But the pilots are going to end up earning an industry low or moving on to new jobs at new airlines at entry level salaries.   That 15 year MD-80 first officer is going to go back to earning $40K a year at some new airline.  So is that 20 year 767 captain.  And they’ll be bitter people until their retirement.

So, I’ll say this to David Bates:  You did well.  You presented facts and dealt with reality.  You can’t help people who don’t want help and your membership is intent on throwing a temper tantrum  at exactly the wrong moment.  No good deed goes unpunished and I feel for you because I think you really did work towards productive and rewarding change among your membership.

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