3 Links I Love: American Adds Profit Sharing, Baltia’s Domestic Plans, Alaska’s Electronic Bag Tag

This week’s featured link:
AA Announces New Profit Sharing PlanAmerican Airlines
American announced this week that it was finally giving in and starting to offer profit-sharing to employees. Everyone outside of top managers will get a share of 5 percent of pre-tax profits (the plan that was in place before). In addition, American is giving its flight attendants a 6 percent raise. Both of these should make employees very happy, though I’m sure there will be some people who find a way to bitch about more money in their pockets. (“It’s not as much as Delta gives, so this sucks.”)

The link above goes to the letter written jointly by American’s President and CEO. (It was already published on that union site, so I just linked there instead of uploading myself.) In it, Doug Parker admits that he got this wrong before.

By eliminating profit sharing in exchange for higher base pay rates, we inadvertently have eliminated some of our shared sense of teamwork – and that was never our intent.

This is certainly a turn of events since for more than a year the airline has been pushing very hard on the idea that profit sharing is only for companies that can’t afford to pay fair wages. The timing of that message was all wrong, however, because Delta and others were raking in big bucks and sharing it with employees. It’ll be a different story when the airlines are all losing money and people get nothing. But American says this is just a sweetener on top of existing pay in order to help build that teamwork again.

Back at the end of 2014, I said American should have offered profit sharing originally, but once it dug in its heels, it no longer could. In that, I was specifically referring to that round of contract negotiations. Now that most of the contracts have been negotiated (and certainly the highest profile ones have), American can go back and offer this to everyone without causing any issues between workgroups. Unions still need to accept this, but they’d be nuts if they didn’t. There is no downside, and it’s what they’ve been clamoring for all along.

As for the flight attendant raise, American is offering 6 percent now, because it says the flight attendants shouldn’t have to wait for United flight attendants to get their act together and come to a joint agreement. See, the American flight attendant deal had built in a one-time adjustment that would bring American’s wages up to the average of Delta and United wages, once United agreed on a joint contract. But United’s flight attendants are deep in the mud and aren’t likely to get a deal soon, so American has decided to just give 6 percent now. If the United attendants get some amazing deal, then American will bring it up as per the original agreement. If the United attendants get a bad deal, American won’t adjust down. This is good news all around for the American flight attendants.

I continue to be amazed at the increases that airlines keep pushing out to employees. I can’t help but wonder if it’s too much. Times are good now, but we have no idea what they’ll look like during the next downturn. Maybe I just spent too much time watching cost-cutting moves during the first, lost decade of this millennium. They say the industry is different now, and I agree with that. I’m just not sure if it’s different enough so that when the next downturn comes, people won’t have to see wages cut again. Hopefully my caution is all wrong, and these new rates are totally sustainable through thick and thin. I do think this sends a very strong message from management that they are taking employee happiness seriously. And if they make a mistake, they’ll own up to it. So there is a tremendous positive here without question.

For now, if I were an American employee, I’d be celebrating.

Links I Love

Two for the road:
Baltia Considering Domestic OperationsWandering Aramean
This should have been an April Fools Day joke. Baltia wants to fly from Baltimore to Islip, Albany, and Trenton. Apparently it’s not. The cherry on top of this is how the letter was addressed “Dear Mr Arameans.” Oh it’s so good.

Always innovating: Alaska testing electronic bag tagsAlaska Airlines Blog
Pretty cool innovation coming out of Alaska. I think this is the first US airline to try this. Basically, you get a bag tag that looks like it has a little Kindle screen on it. You flip it on and check in. Then the tag image will auto-populate. Go to the airport, someone scans it to activate it, and your bag is on its way. Each tag will last for two years. Pretty cool.

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9 Responses to 3 Links I Love: American Adds Profit Sharing, Baltia’s Domestic Plans, Alaska’s Electronic Bag Tag

  1. Andy says:

    That letter from Baltia is pure gold. I lost it at “A businessman in Albany could fly to Islip (one-stop via BWI,) to conduct important meetings, and then fly onward to Trenton (one-stop via BWI) in time for some rest and next-day meetings.”

    • Jack in SF says:

      Look at the bright side of Baltia: A lot of nerds (myself included) would love to fly in an Avro RJ!

  2. Sean S. says:

    I think Alaska may be the first company with bag tags that autopopulate at home. I know other carriers use electronic tags that they or you put on at the airport, mostly to benefit tracking purposes, but I am not aware anyone has a consumer take home product.

  3. Daniel Betts says:

    I am so ready to jump on the first Baltia flight. They may only sell one ticket but it will be my ticket.

  4. Edward says:

    Given the amount of value destroying flight attendants at American (lazy, rude, both, etc.) it’s amazing that they’re giving EVERYONE a raise. This is plain lazy management. Managing people well requires hard choices, including differrntiated pay based on performance!

    • Sean S. says:

      And how exactly would you determine performance? Serious question. Everyone always talks about “performance” but what are the metrics? Scorecards from customers? Number of credit card sign ups (like many retailers)? There’s a reason why seniority is often the default determinant; there is not many good ways in some industries to measure performance in some hard and NEUTRAL fashion (try basing something on a supervisors write up and you are probably open g yourself up to discrimination lawsits).

  5. Joey jaidee says:

    Just out of curiosity Edward how does one determine those differing rates of pay for crew members???

  6. Dennis Reynolds says:

    Cranky,
    I’m curious as to why every time you write a featured link about American Airlines employees you try to “stir-the-pot” and belittle them? Loved your latest quote-“I’m sure there will be some people who find a way to bitch about more money in their pockets.” So you’re saying employees at AA do nothing, but bitch and complain? Is this your interpretation of objective journalism?

    I know you’re a big fan of Doug Parker. That being said, this merger would never occurred without labor. I don’t think it’s too much to ask for a little recognition in that regard. When this deal was dead who went to Washington DC and picketed? It was the front line employees. Management deserves credit, and they certainly have rewarded themselves. Yet the frontline employees have been an afterthought.

    I know you’re going to say AA employees have higher wages, but according the Montley Fool, even United Airlines which is less profitable than Delta earned 700 million in profit sharing for 2015. “As a result, most American Airlines employees now lag their peers (i.e., including profit sharing) This has contributed to sour employee relations.”

    I’ve been through five mergers and they’re ever easy. The path that this mgt team took was reckless. First off, you have two airlines with vastly different cultures. The first thing mgt did was eliminate LUS profit sharing. The second thing was LUS seniority based travel benefits. Then management guts LUS health insurance and replaces it with the much cheaper AA insurance. Then mgt imposed the “hard 40” on AA f/as. PBS makes its debut and became a complete disaster for LUS f/as during the month of December. (Senior f/a’s with 28 years seniority worked 16-17 days straight through the holidays. While new hires had the holidays off.) The company blamed it on a glitch and said it was too late to change without compromising the schedule. I could go on and on…..I’m not even going to go into the mess in regards to LUS vacation.

    I’m bringing this up because I think you’re losing sight as to how bad morale was. You could feel it impacting everyone. The overall feeling was that mgt wanted to make things so bad that people would quit. It was getting to the point that employees started to rally around their roots. I’m not going to bring up the nicknames that were given, but it was getting ugly. Employees from both airlines started to point fingers at each other.

    I think Doug finally realized this wasn’t some type of normal backlash from a small group. It entailed a much larger group from the top down. He had to something, and I’m glad he did. The sign of a good leader is to listen. For over two years we have been begging him to step up and do the right thing. Awarding us a small piece of the pie sends a message he’s willing to listen and do something. That could be a good thing if a downturn were to occur. Labor would probably be much more willing to help rather than turn a deaf ear.

    • CF says:

      Dennis Reynolds – First and most importantly, I hope you’re not coming here for “objective journalism.” This is an opinion blog. If you want news, you should look elsewhere. Everything here is entirely subjective. Now on to your points.

      I’m not sure why you think I’m belittling the employees. Certainly I take issue with the extreme factions in any labor or management group. And frankly, it’s the extreme faction in any group that would complain about the addition of profit sharing without any strings attached. Am I suggesting that “employees at AA do nothing, but bitch and complain”?
      Absolutely not. That’s quite a stretch for you to interpret my comments that way. But there are always some people in every situation that will find a way to complain.

      Your point that American lags peers including profit sharing is somewhat misleading. Profit sharing is never guaranteed, so of course, in a good year, those who get profit sharing are going to make more money. But they have less guaranteed money, and in a bad year, when profit sharing shrinks dramatically, then American employees will make more. Over time, American employees should make more, though we have no way of knowing how the industry will do in the future. Had this whole debate come out at a time when the airlines weren’t making money, nobody would fight for profit sharing. It’s just where we are in the cycle.

      And that’s why I said originally that American should have had profit sharing in the first place. People wanted it and why should management try to force higher base wages on people when they don’t want it? Now with all the morale issues, employees have gotten the best of both worlds now that management sees it as a big enough problem.

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