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Login to post Forums » Off-topic discussion » American Airlines files for bankruptcy all while their CEO's earn more and more money.

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Nov. 30, 2011 12:30 p.m. Xceler8x SuperDork

Despite losses, American Airlines CEO's compensation climbs

Chief Executive Gerard Arpey received $5.2 million in total compensation last year, even though the parent company of American Airlines was the only major U.S. carrier to lose money in 2010.

Arpey's compensation grew 11 percent over 2009, boosted by an increase in stock awards and options that were granted in May.

The workers tried to sound the alarm...

American Airlines union workers protest executive bonuses

American Airlines' 18,000-member Association of Professional Flight Attendants said they are picketing and protesting executive bonuses at 10 of the nation's largest airports.

Parent company AMR is expected to award stock-based bonuses to its top managers in conjunction with its quarterly earnings report, officials said.

Members of American's Transport Workers Union said they will be speaking with airline passengers in May about how American's baggage and other ancillary fees are not benefiting front-line workers, only management.

"We want passengers to know that when they pay additional fees to check a bag, that money isn't being seen in the paychecks of baggage handlers, mechanics or other front-line workers," said Sidney Jimenez, president of TWU Local 568 in Miami, Fla. "However, the top executives are awarding themselves bonuses year after year."

All for nothing.

American Airlines files for bankruptcy

But there's more to the story. The unionized work force gave major concessions in 2003.

American Airlines Parent AMR Files for Bankruptcy as Horton Is Named CEO

American’s pilots, flight attendants, mechanics and baggage handlers wanted to use the contract talks to regain some of the $1.6 billion in annual concessions they gave in 2003 to help the company avoid bankruptcy.

“We agreed to sacrifice based on the expectation that our airline would regain its leadership position,” David Bates, president of the Allied Pilots Association, told members in an e-mail. “What has transpired since has been nothing short of a ‘perfect storm.’”

The Transport Workers Union, which represents aircraft mechanics and baggage handlers, “will fight like hell to make sure that front-line workers don’t pay an unfair price for management’s failings,” James Little, the union’s international president, said in a statement.

Eh. Screw them. The CEO's got their's. Even though the Union tightened it's belt to help the company the CEO's will just run it into the ground and declare bankruptcy. Interestingly enough, due to bankruptcy the union will have to concede more. I wonder what kind of pay cut the CEO's will take? I'm taking bets that will amount to a 0% pay cut for the rich fat cats.

Occupy.
Nov. 30, 2011 12:35 p.m. ReverendDexter SuperDork

Well, really, what can any of us do besides not fly American Airlines?

And are other companies really better enough to shift business to them instead?
Nov. 30, 2011 12:49 p.m. Joe Gearin Associate Publisher

ReverendDexter wrote:

Well, really, what can any of us do besides not fly American Airlines?

And are other companies really better enough to shift business to them instead?

I fly many miles each year working for GRM. The airlines I've had decent experiences with recently:

Southwest-- treat you like cattle, but planes are clean, workers generally friendly, fares low, and bags fly free

Jet Blue-- Good service and rates if you are flying to the Northeast. Limited range for the rest of the country though.

Frontier--- hit or miss, but generally decent

U.S. Air--- hit or miss, but their hub is in Charlotte which is a welcome relief as opposed to flying into Atlanta.

Carriers I try to avoid:

Delta-- nearly every flight I've had in the last two years has been delayed, cancelled, or otherwise screwed up. Terrible service, old planes and a hub in supremely overcrowded Atlanta. Avoid if you can

American--- Sub standard service, rates, and planes in my recent experience

Just my .02 YMMV
Nov. 30, 2011 12:53 p.m. racerfink Dork

I fly Southwest every chance I get. Sitting on your ass and complaining (occupy) is not going to change anything. Money talks louder.
Nov. 30, 2011 12:58 p.m. 92CelicaHalfTrac SuperDork

ReverendDexter wrote:

Well, really, what can any of us do besides not fly American Airlines?

This. I've never flown them, probably never will.

There, i did my part. I occupied.

By occupying other planes.

I can has a cookie now?
Nov. 30, 2011 12:59 p.m. novaderrik Dork

i'd boycott them, but i've never been on an airplane and the last time i was in an airport was in the early 90's sometime..
Nov. 30, 2011 1:00 p.m. Streetwiseguy Dork

Different country, but I'll borrow a Cessna before I'll fly Air Canada.

On topic, you have to wonder about how contracts for bonuses are written. I'm confident that the bonuses paid out were completely legal, and within the boundaries of the contract. Problem being, who is negotiating the sweetheart bonus structures? People who may be in line for the same bonus structure?

I don't have a solution for a private corporation, but I sure as hell do when government bailout money is involved. You don't get a bailout, you get nationalised. When you've recovered, the management can buy the company back. If you don't recover, you are wound down and auctioned.

I'm still bitter about the money W gave to your banks, and it wasn't even my tax dollars.
Nov. 30, 2011 1:27 p.m. aircooled SuperDork

Streetwiseguy wrote:

...On topic, you have to wonder about how contracts for bonuses are written. I'm confident that the bonuses paid out were completely legal, and within the boundaries of the contract. Problem being, who is negotiating the sweetheart bonus structures? People who may be in line for the same bonus structure?...

I believe you are correct about this. From what I know generally the board of directors sets these things up. Guess where the board comes from? Yes, generally other high ups in business. So basically a huge circle jerk of salary, bonuses and stock options.

Even if the board is not involved, there is a certain expectation at this point about what the standard compensations are, so I am sure that has something to do with it.

I am not as concerned about how much these guys are making and how much it is costing the company (realistically it is generally a very small piece of the pie). I find it highly disgusting that there seems to be absolutely no aspect of responsibility for the what happens to the company that they are supposed to be in charge of. Company does good, big bonuses. Drive company into the ground, bonuses.

The stock bonuses BTW are a form of tax dodge I believe. Since the stock options are classified as investments income it will be taxed at a lower rate then standard income even though it is clearly a form of compensation.
Nov. 30, 2011 1:32 p.m. mad_machine SuperDork

aircooled wrote:

I find it highly disgusting that there seems to be absolutely no aspect of responsibility for the what happens to the company that they are supposed to be in charge of. Company does good, big bonuses. Drive company into the ground, bonuses.

that is the sickening part. my humble opinion.. for what it is worth.. is that every company has the right to make a profit. I will not take that right away.. but I feel that the CEOs and the like should get their bonuses based on how the company does.

Post a big profit.. get a big bonus. Lose money.. guess you are living on salary that year
Nov. 30, 2011 1:33 p.m. DoctorBlade Dork

Isn't throwing the old CEO out one thing done during these times? If they do, they'll have only themselves to blame if they offer a similar package to his successor.
Nov. 30, 2011 1:35 p.m. carguy123 SuperDork

I've hated AA because of all the stunts they pulled trying to run Braniff out of business.

But to run a major corporation you need someone with the skill set and to get them it costs big bucks.

In troubled times the job entails more work rather than less so they need to be paid more to get them back to being profitable. Cutting a salary &/or hiring a subprime boss only guarantees they will close their doors. I don't think that's the goal here.

And Xceler8x it might be true the Unions gave up something, the extra costs of the Union in the first place surely had a hand in where the company is today, correct?

"AMR, which replaced its chief executive in the move, had been mired for years in fruitless union negotiations, complaining all the while that it shoulders higher labor costs than rival domestic and foreign carriers that have already restructured in bankruptcy."

"American Airlines, once the largest U.S. carrier, is now third behind United Continental Holdings Inc's United Airlines and Delta Air Lines Inc, both of which used Chapter 11 to cut costs and later found merger partners."

Sounds like a sound move to me. We have proof that is the proven path to solvency.
Nov. 30, 2011 1:47 p.m. HunterJP Reader

I think this is the main issue with the general economy right now. There are no checks and balances within corporations. The top brass in this country continue to make more and more, no matter how their company is doing, while the workers make less, or are laid off to increase the margins. The last thing I want is more government interference within the private sector, but something should/needs to be done.

Heck, it isn't even just private business. Look at congress. They make more and more, while the country goes deeper and deeper in debt. Who is going to get hit hardest when the piper comes calling? I think that answer is obvious.
Nov. 30, 2011 2:02 p.m. ronholm Reader

The problem is that we seem to be willing to just let them file bankruptcy and walk away...

Make them pay their debt..

Or make them close the door trying...

No need for more regulation... Just a less comfortable safety net...
Nov. 30, 2011 2:18 p.m. Otto Maddox Dork

Well, our capitalism is socialized.

Public companies go bankrupt and reorganize. Private companies go bankrupt and the entrepreneurs who just failed start again with a new company and a clean slate. The public company bankruptcies get more press but the private ones really suck just as much. When there is no major penalties or liability for failure, why not take a large risks? When these types have their third or fourth gamble pay off, we revere them as brilliant businessmen that prove the American dream still exists. The general public shares in all of their failures but we sure as hell don't get paid back with their successes.
Nov. 30, 2011 2:22 p.m. Sky_Render Reader

Joe Gearin wrote:

Delta-- nearly every flight I've had in the last two years has been delayed, cancelled, or otherwise screwed up. Terrible service, old planes and a hub in supremely overcrowded Atlanta. Avoid if you can

I probably travel as much as you do, and I wholeheartedly agree with this statement. Unfortunately, my employer has some sort of contract with Delta, so half my trips (at least) are on their crappy airline.
Nov. 30, 2011 2:31 p.m. oldsaw SuperDork

In reply to Otto Maddox:

Ummm, private sector companies have investors who risk their investments with the hope/expectation the business plan succeeds. Those same investors take the hit when ventures fail.

Please expand on the idea that the general public shares in all the failures when it didn't participate in the start-ups.

Just askin'............
Nov. 30, 2011 2:38 p.m. Otto Maddox Dork

In reply to oldsaw:

There is usually some amount of private investment to start things out. But to do anything significant, you have to get bank loans and/or credit with suppliers. Once the business fails, the banks and the suppliers get stiffed. The suppliers raise their prices to cover their losses. Banks charge more fees, higher interest rates (and if they get burned too much they constrict capital). Everybody else pays these higher costs. The entrepreneur just starts a new LLC or Corporation that is a separate legal entity from the failed one and they start over again.
Nov. 30, 2011 2:40 p.m. Otto Maddox Dork

In reply to Otto Maddox:

They are like Donald Trump on a smaller scale - you wash your hands of the failures but keep all the riches of the successes.
Nov. 30, 2011 2:42 p.m. Otto Maddox Dork

As for public companies, aircooled is 100% on about the circle jerk of dudes who appoint each other to boards and hire each other for executive jobs and pretty much determine whatever pay they want.
Nov. 30, 2011 3:01 p.m. oldsaw SuperDork

Otto Maddox wrote:

In reply to oldsaw:

There is usually some amount of private investment to start things out. But to do anything significant, you have to get bank loans and/or credit with suppliers. Once the business fails, the banks and the suppliers get stiffed. The suppliers raise their prices to cover their losses. Banks charge more fees, higher interest rates (and if they get burned too much they constrict capital). Everybody else pays these higher costs. The entrepreneur just starts a new LLC or Corporation that is a separate legal entity from the failed one and they start over again.

That seems a bit of a stretch, Otto.

Successful companies who offer the occasional crap product still have to cover costs in developing, producing and marketing their failures; those costs are not absorbed by the companies' bottom line.

That said, I have a real problem with any bank/lender that throws money at a start-up without performing due diligence or doesn't ensure it's first in line to seize assets in case of bankruptcy.
Nov. 30, 2011 3:11 p.m. Otto Maddox Dork

In reply to oldsaw:

That has been my experience. My frustration stems from seeing guys doing this over and over. They take big risks, but when it fails, they don't lose their McMansion or their 7-series.

A great example is restaurants. They fail like crazy. They usually have some private investment, but the bulk of the equipment is financed and the supplies, food, and everything else is on credit. All that kitchen crap might be worth 10 cents on a dollar to a liquidator.

Edit: I thought I sounded pretentious, so I took some stuff out.
Nov. 30, 2011 5:35 p.m. madmallard HalfDork

Otto Maddox wrote:

Edit: I thought I sounded pretentious, so I took some stuff out.

i never let that stop me~
Nov. 30, 2011 7:31 p.m. gamby SuperDork

Xceler8x wrote:

Despite losses, American Airlines CEO's compensation climbs

Chief Executive Gerard Arpey received $5.2 million in total compensation last year, even though the parent company of American Airlines was the only major U.S. carrier to lose money in 2010.

Arpey's compensation grew 11 percent over 2009, boosted by an increase in stock awards and options that were granted in May.

The workers tried to sound the alarm...

American Airlines union workers protest executive bonuses

American Airlines' 18,000-member Association of Professional Flight Attendants said they are picketing and protesting executive bonuses at 10 of the nation's largest airports.

Parent company AMR is expected to award stock-based bonuses to its top managers in conjunction with its quarterly earnings report, officials said.

Members of American's Transport Workers Union said they will be speaking with airline passengers in May about how American's baggage and other ancillary fees are not benefiting front-line workers, only management.

"We want passengers to know that when they pay additional fees to check a bag, that money isn't being seen in the paychecks of baggage handlers, mechanics or other front-line workers," said Sidney Jimenez, president of TWU Local 568 in Miami, Fla. "However, the top executives are awarding themselves bonuses year after year."

All for nothing.

American Airlines files for bankruptcy

But there's more to the story. The unionized work force gave major concessions in 2003.

American Airlines Parent AMR Files for Bankruptcy as Horton Is Named CEO

American’s pilots, flight attendants, mechanics and baggage handlers wanted to use the contract talks to regain some of the $1.6 billion in annual concessions they gave in 2003 to help the company avoid bankruptcy.

“We agreed to sacrifice based on the expectation that our airline would regain its leadership position,” David Bates, president of the Allied Pilots Association, told members in an e-mail. “What has transpired since has been nothing short of a ‘perfect storm.’”

The Transport Workers Union, which represents aircraft mechanics and baggage handlers, “will fight like hell to make sure that front-line workers don’t pay an unfair price for management’s failings,” James Little, the union’s international president, said in a statement.

Eh. Screw them. The CEO's got their's. Even though the Union tightened it's belt to help the company the CEO's will just run it into the ground and declare bankruptcy. Interestingly enough, due to bankruptcy the union will have to concede more. I wonder what kind of pay cut the CEO's will take? I'm taking bets that will amount to a 0% pay cut for the rich fat cats.

Occupy.

If OWS had any ability to be organized, this would be the exact situation they should be rallying against.

Anti-labor fatcats getting their way and screwing the working man. It's shameful.
Nov. 30, 2011 7:40 p.m. mad_machine SuperDork

gamby wrote:

Anti-labor fatcats getting their way and screwing the working man. It's shameful.

That is the way we do business in the US now. They have gotten so good at hiding their bonuses and lack of oversight into their failings by blaming it on organised labour that the public has bought into it hook, line, and sinker.

Right now the word "union" is a very dirty word.. no matter how good it benefits the common man
Nov. 30, 2011 8:07 p.m. bastomatic Dork

One of the biggest real problems is that administrative/CEO pay is not directly tied to company performance. If the management has no real incentive to not fail, then failure is an acceptable and lucrative option.

And don't buy for one second the argument that CEOs need to be offered bonuses and pay that is so out of line with their performance. The idea that more money brings better performance is ludicrous, and offensive. The same argument is unacceptable when applied to "blue collar" work, like teachers, police, nurses, so why is it applicable to those who already make fortunes like administrators, executives, and other elite positions?

If shareholders, boards, and those with the financial reigns decided to cut executive pay, and tie it directly to performance, what do you think would happen? Perhaps we would get executives who wanted to shephard a corporation to success rather than command poorly for a short time for immense personal gain.

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