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    | Mar-28-2007 American Airlines speeds up its fleet renewal plans(topic overview)CONTENTS:
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FORTH WORTH, Texas — American Airlines said Wednesday it plans to accelerate the delivery of 47 Boeing 737-800 aircraft, as it replaces some of its aging MD-80 fleet. The carrier said the move is part of its plan to improve fleet fuel efficiency by at least 20 percent by 2020. [1] While the MD-80 remains an excellent aircraft that serves us and our customers well, the new 737s will be a great addition to our fleet that will lower our operational costs, boost the fuel efficiency of our fleet and also bolster our efforts to lower emissions and noise levels," said AMR Chairman and CEO Gerard Arpey, in a statement.[2] "Our existing agreement with Boeing gives us ample flexibility for our long-term fleet plan," said CEO Gerard Arpey in a prepared statement. He said American can buy additional 737s on short notice and has "the right to purchase 787 aircraft."[3] American has notified Boeing that it wants delivery of three of the aircraft in 2009 instead of the previous 2016 schedule. In a statement, American said it plans to accelerate the delivery of other aircraft from their 2013-2016 delivery date to a time frame of 2009-2012, depending on such factors as future economic and industry conditions and the financial condition of the company.[4] Airlines mostly lose money. Their shares, over time, have been poor investments. It irks executives to be running a huge and well-known company and be paid far less than other executives. Another Dallas area service industry company with about $20 billion in sales, the Electronic Data Systems Corporation, paid its chief executive, Michael H. Jordan, cash, stock and other compensation valued at $13.6 million last year.[5] As labor talks between American Airlines Inc. and its pilots continue, the issue of executive compensation is coming into play: Pilots are angry about 21 million dollars in stock that will be paid to the company's top 5 executives in April, and are using it as a bargaining chip to avoid further concessions. While it's certainly tempting to accuse management of hypocrisy in paying big bonuses while attempting to slash the pay for rank and file workers, it looks overblown to me.[6] Mr. Arpey declined to be interviewed. American faces negotiations with its two other big unions: the Association of Professional Flight Attendants in early 2008 and the Transport Workers Union, which represents mechanics and other ground workers, in November of this year. The carrier has higher labor costs than most of its competitors because it did not go through bankruptcy, the approach some airlines took to extract a second round of pay concessions after Sept. 11, 2001.[5] American has returned planes, canceled aircraft orders or deferred deliveries at least four times since 2002. The carrier pared its fleet to six types of aircraft from 14 to simplify operations and reduce costs as losses built to more than $8.2 billion over five years through 2005.[7] The carrier has said it is a priority to begin phasing out its fuel-inefficient Boeing MD-80 airplanes. American has 672 planes in its fleet, of which 300 are the narrow-bodied, twin-engined MD-80s, according to the airline's Web site.[8] American Airlines, Inc., a wholly owned subsidiary of AMR Corp., has accelerated its fleet renewal plan by beginning the replacement process for a portion of its MD-80 fleet.[9] "We believe that beginning to replace some of our MD-80s in a measured way makes economic sense and represents prudent and strategic reinvestment in our business that will bring long-term benefits to shareholders, customers and employees," Mr. Arpey said. "Our existing agreement with Boeing gives us ample flexibility for our long-term fleet plan," he said.[10]  In 2005, the last year with full pay information available, Mr. Arpey was paid cash and stock then valued at about $1.5 million. While executives in general view their pay relative to that of other executives, workers view executive pay relative to rank-and-file wages, especially at companies where workers made sacrifices to keep the place in business. [5] Shares of parent AMR Corp. dipped 84 cents, or 2.7 percent, to $30.40 in morning trading on the New York Stock Exchange, as airline stocks overall fell on rising crude oil prices.[1] In all, about 1,000 managers will split roughly $170 million in AMR shares. This Thursday, Mr. Arpey and other top executives will have their monthly meeting with American’s top union officials.[5] Executives are getting somewhere around $200 million, not $21 million. That amount roughly equals the entire profit for the year 2006, our first profitable year since 2000. Share holders deserve better utilization of their capital.[6] Don't compare our executive pay with executives in other industries - other industries may be more profitable and can afford to pay executives excessive bonuses, not the airlines. Otherwise, I'll compare my salary with a manager of a $150 million asset in another more profitable industry, and subsequently demand a massive bonus too. [6] Across the industry, as airlines become profitable again, workers are agitating to recover some of the pay and benefits lost in recent years. Delta Air Lines has already promised its nonunion workers a raise when it exits bankruptcy this spring, hoping to buy some peace and avoid unionization beyond its pilots.[5] The crux of the issue is that pilots and other workers are still flying at reduced wages, while executives are getting perks now that the carrier is healthier than it was after the airline slump following the 2001 terrorist attacks.[11] The carrier, a unit of AMR Corp., said it has notified Boeing Co. that it will begin pulling forward the delivery of 47 Boeing 737-800 aircraft under an existing purchase commitment made in 1996. [12] The decision marks American's first major aircraft announcement since 1996 when it signed a sweeping deal with the Boeing Co. to buy 103 jets and rights to buy an additional 527 by 2018. The deal speeds up delivery of jets that originally were to begin arriving in 2006, but had their delivery pushed back seven years.[10] In November 2004, American deferred 54 Boeing aircraft deliveries until between 2013 and 2016, from scheduled dates of 2006 to 2010. A month before that decision, it canceled orders for 18 Embraer jets at its American Eagle commuter carrier.[7] Scott Hamilton, who publishes an online newsletter about aircraft manufacturers, says Boeing can provide major customers with deliveries as needed, even when other customers may have to wait longer for deliveries of sought-after aircraft like the 787. "What Boeing does is to reserve delivery slots for customers such as American," he says, "or they will overbook sales in anticipation that there will be some cancellations."[3] The move approved by American's board and its parent company AMR Corp will pull forward the deliveries of all 47 planes to a 2009-12 timeframe from a 2013-16 schedule. [13] The 737-800s will be delivered over three years. With the MD-80s burning about 25 percent more fuel than their replacements, the new planes may help American pare a jet-fuel bill that rose 14 percent in 2006 to $6.4 billion.[7] American said the 737 consumes 25 percent less fuel per available seat mile than the narrow-body, twin-engine MD-80.[12] American's 300 MD-80s have an average age of 17.2 years and are the largest single jet type in the airline's 673-plane fleet. [7] Spending on jet fuel is the carrier's second- largest expense, after labor. "It's time for them to do it,'' George Hamlin, president of Hamlin Transportation Consulting in Fairfax, Virginia, said today in an interview. "It's not only a question of high fuel costs with the MD-80s, but also a question of reliability.''[7] Replacing the aging planes is part of American's plan to reduce operating costs and fuel consumption.[14] American's contract with Boeing allows the airline to buy more 737s on short notice, as well as the right to purchase wide-body 787 Dreamliners. [7] The 737-800 is Chicago-based Boeing's most popular model, accounting for 61 percent of the 737 order backlog of 1,512 planes. It carries a list price of $66 million to $75 million, which doesn't include discounts traditionally given to airlines.[7] The airline also wants the other planes previously scheduled for delivery in 2013-2016 to be moved up to delivery in 2009-2012.[2] The airline said any decision to accelerate deliveries will depend on economic conditions and the company's financial strength. [1] Don't compare my pay with bankrupt carriers. Employees at those airlines were given a choice between bankrupt wages and finding employment elsewhere, since their company was on the verge of liquidation, and could not possible pay a fair wage. The employees have taken a chance, and stuck with their unfair wages in the hope they will one day recover their losses, and become a respectable company paying decent wages again.[6] Management pay in the airline industry generally is lower than compensation at other big companies — with good reason.[5] Rewards are being paid to managers accross the company - the crisis in the industry is apparently over. It's time for Pilots to correct our pay-scales to again reflect the level of skill, responsibility, and revenue generation attributable to the job.[6] ABCMoney.co.uk does not guarantee the accuracy of any share prices or stock quotations displayed. These are not real time quotes; all are delayed by at least twenty minutes and are for information purposes only. [15] Harrison said that after the Sept. 11 attacks, the contract with American was rewritten so as to allow the carrier to defer deliveries to the 2013 to 2016 time frame.[3] United Airlines pilots, whose contract is not amendable until January 2010, are complaining about executive compensation there and preparing to demand raises.[5] The pilots and mechanics have been on a huge RASH of cancelling flights to make there point. If you were on a flight recently that was cancelled because of a mechanical reason. its bogus. its a union worker hissy fit. as usual.[6] I'm as much of a critic of high executive pay as anyone, but the unions appear to be using executive bonuses as a red herring here.[6] REFERENCES 1. AMR Accelerates Boeing 737 Deliveries | Chron.com - Houston Chronicle 2. American Airlines wants its 737s sooner - Puget Sound Business Journal (Seattle): 3. AMR Nears Fleet Changes 4. Latest News | News | Hemscott 5. Stock Bonuses at American Anger Pilots | theledger.com 6. American Airlines pilots angry over executive bonuses - BloggingStocks 7. Bloomberg.com: Worldwide 8. American Airlines'ups fleet renewal plan - Mar. 28, 2007 9. StreetInsider.com - American Airlines (AMR) to Accelerates 737 Deliveries 10. American accelerates jet order | WFAA.com | Business 11. Latest News | News | Hemscott 12. AMR's American Air Accelerates Fleet Renewal Plan | Autos & Transport | Reuters.co.uk 13. American Airlines To Move Up Order Of Boeing Aircraft - Biz News - Playfuls.com - Business & World 14. American accelerates 737 orders - Dallas Business Journal: 15. AMR accelerates Boeing 737 deliveries |
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