Tuesday, November 29, 2011
Who's Flying This Plane?
That's the unfortunate sound of the world's last legacy airline filing for bankruptcy. And the door finally closing on whatever scraps were left of flight's golden age.
Delta, Continental, United, TWA, Northwest, PanAm... they've already been through the economic blender that has been deregulation, 9/11, exorbitant fuel costs, and intransigent unions. Today, after years of struggling against the tide, it is American Airlines' turn.
One of the world's first airlines. And the first to glamorize flight with luxury airport clubs, the first to computerize their ticketing, the first to offer flyer rewards, and the last to pretend that flying today is as enjoyable as it was back in the 1960's.
Technically, American's parent company, AMR, is the entity filing for bankruptcy, an eventuality about which experts have been speculating for months, if not years. Somehow, as all of the other major traditional airlines crashed onto the runway of brittle economics and either went out of business, merged, or patched themselves up for the new reality of flight in the 21st Century, American kept dodging the bankruptcy bullet.
Which bullet finally brought American to its knees is presently up for debate: was it the unions for pilots and flight attendants, which have fought with management for years over new contracts? Was it the oil industry's crafty toying with energy prices that neither the automotive nor airline industries could tame? Was it the hub-and-spoke business model that American had pioneered, and had been reluctant to significantly modify? Was it lingering issues from its rocky merger with TWA shortly before 9/11? Was it simply the ability of smaller, more nimble airlines like Southwest and JetBlue to react more efficiently as incessant waves of economic instability wafted through the industry? Or, as is most likely, was it a combination of all these factors which created a downdraft too powerful for American to remain aloft?
Chapter 11 bankruptcy protection will give the still-mighty airline some time to consider how much each of these factors influenced today's decision. Indeed, American's board and executives have undoubtedly been analyzing all of these issues for the past several years as they've staved off bankruptcy time and again. Yet to what extent will these executives at American be willing to consider the effect their own nicely-padded salaries and bonuses have played into today's announcement?
Not the actual dollar amounts for these salaries and bonuses, but the mentality with which these rewards were paid.
Blame the unions for waging a bitter public relations war over their contracts if you like, but corporate has never been able to mount a convincing campaign to prove that the good-will used to secure hefty employee concessions after the trauma of 9/11, when two American flights were lost, wasn't also destroyed by subsequent executive rewards. Substantial pay and benefits reductions were agreed upon by all of the unions at American, with the understanding - however unofficial - that as profitability returned, so would those things lost to concessions. Instead, as flashes of profitability did indeed flicker across AMR's bottom line for a few budget quarters, it was the suits in corporate that got the rewards, not the rank and file workers.
Granted, American has fewer executives to reward than flight attendants and pilots, but considering that many of the corporate personnel who received handsome financial upgrades were already being paid far more than some senior pilots, the inequity wasn't really rationalized very well.
Something about the price of good corporate talent being far more expensive than retaining good pilots. At least that's how it sounded. As if American Airlines was all about corporate strategy, instead of flying planes.
Think about it: Having MBA's without pilots licenses claiming that good talent costs a lot of money doesn't fly when the people responsible for literally keeping your customers alive have to undergo rigorous testing and training multiple times throughout their careers. And every flight they pilot spans the gap between profit and loss for any airline.
After all, when was the last time an airline accountant or sales executive avoided a midair crash, saving hundreds of lives? When was the last time a senior analyst had to land a plane during a blizzard? How many senior vice presidents can control a plane after a bird has flown into one of its engines?
American Airlines employs an estimated 12,000 pilots, many of whom earn over $100,000 per year, making this group of employees one of company's most significant cost factors. And it's been argued that American's pilots are among the best-paid in the entire industry. Indeed, it's hard to claim that these professionals are under-paid.
But that's not really the point, is it?
Corporate America, not just American Airlines, but across the board, has become awash in excessive executive compensation. Warren Buffett, the spectacularly successful investor, has complained for years that salaries, perks, and golden parachutes for America's corporate elite defy economic logic. At American, however, the pilots have been particularly aggrieved by corporate's apparently willful abrogation of good faith after post-9/11 cost-cutting. Do people who spend their days in meetings and analyzing data deserve far more compensation than the people who literally keep thousands of passengers from dying every single day?
It's this apparent discrediting of whatever good-will AMR tried to present during union negotiations that likely contributed to the persistent chill that has choked any possibilities of agreements between labor and management at American. That's not to say that union leaders have been model employees during these years of negotiations, or that they've demonstrated good reasoning skills. But by falling into the tired old trap of labor-management distrust to retain, ostensibly, a coterie of high-priced back-office talent has obviously hurt the airline.
By way of a meager defense, it's not exactly AMR's fault that our economy's corporate narcissism favors pedigreed executives with rewards incommensurate with their individual contributions to the organization. Most bonuses are awarded based on calculations of a company's worth which, while subscribing to shrewd metrics of value, are still more arbitrary than fact. After all, the stock market rewards assumptions, not historic data. No single corporation - or industry - will be able to change that, even as stocks continue losing their mainstream allure.
Meanwhile, although pilots do have a highly personalized incentive to get their planes from airport to airport in one piece every day - namely, their own lives - the mere mention of Captain Chesley "Sully" Sullenberger, "the Hero of the Hudson," should make the board of any airline sit up and reconsider their own worth relative to the people sitting in their cockpits.
Not that being more conciliatory towards their pilots could have saved American Airlines from bankruptcy today. But it could have resolved one particularly onerous piece of their financial puzzle based solely on respecting the responsibility with which the company vests each of their pilots.
Respect for responsibility should still go a long way in our society. Today's bankruptcy announcement and this one factor in that announcement could serve as a microcosm of corporate greed and its rampant deconstruction of our nation's economy these days. Not that I'm naive enough to hope, however. What's more likely is that corporate America is already salivating over whatever spoils it might be able to pick from American's carcass.
Yes, our airline industry faces far more daunting challenges than pilot pay and executive compensation. But I've said it before, and I'll say it again: on those rare times when I fly, I want my pilots happy. Oddly enough, though, I really don't care how happy the executives at their airline feel. I suspect most of the flying public who wants to get home safely feel the same way.
That perspective may not win airlines many friends on Wall Street or in corporate boardrooms.
But I think the rest of us can live with that.
Disclaimer: I am not a relative of a commercial airline pilot.