This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Union: American Airlines Overstates Labor Cost Gap

Stocks in this article: AMR DAL LUV

DALLAS TheStreet) -- A key component of the AMR> (AMR) recovery scenario is that contract improvements at competitors will lead to convergence with American Airlines' labor costs, which the carrier says are the highest in the airline industry.

American's flight attendants aren't buying it. As far as flight attendant costs are concerned, convergence in labor costs is already here, they say, a result of a series of contract improvements made by American's competitors.

"The cost disparity had turned to zero because of the contract increases," said Dan Akins, a consultant who serves as economic advisor for the Association of Professional Flight Attendants, in an interview. APFA represents about 18,000 American flight attendants. By mid-2011, "the flight attendant contract costs of other carriers were equivalent to those at American," Akins said.

"The conundrum for me is that American's cost disparity relative to their competitors has been shrinking, yet their performance in terms of profit margins has fallen further and further behind their competitors," he said.

Nevertheless Akins said he does not see an imminent bankruptcy, despite recent investor concerns that resulted in an overly enthusiastic sell-off last week.

On Oct. 3, American shares opened at $2.82 and sank as low as $1.75. Shortly before noon on Tuesday, the shares had nearly recovered the entire amount of that decline, as they traded at $2.73, up 8%.

It is accepted as common wisdom in the airline industry that American, the only legacy carrier never to seek bankruptcy protection, has a labor cost disadvantage relative to its peers. American has put the amount of the discrepancy at about $800 million annually. That number is not accepted by APFA, which says it is frustrated, not only by continual repetition of the number but also by the suggestion that American employees made no concessions. "In March of 2003, employees gave back $1.8 billion annually, and those savings are continuing," Akins said.

According to American, the $800 million includes roughly $200 million each for three items: wages, work rules, benefits (primarily health care for both current employees and retirees), as well as another $200 million annually that other carriers save by not contributing to pension plans. American says the numbers are based on an analysis that takes into account an average of contracts at each American competitor, rather than any specific contract. Akins said the computation has not been proven to the flight attendants.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,569.95 +213.08 1.23%
S&P 500 2,037.24 +24.35 1.21%
NASDAQ 4,706.8440 +62.5320 1.35%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs