Currently American’s pilots are paid the greater of schedule or actual for flights on a leg by leg basis, just like other carrier’s pilots are paid.
If a pilot is scheduled to fly a three day trip that consist of nine legs (flights) over that three day period, the pilot will be paid the greater of what each leg is scheduled to be flown or what is actually flown.
Example:
A pilot is scheduled to fly a three day trip that pays 15 hours of total pay for the three days. On the first leg of the trip, he is scheduled to fly from Chicago O’hare to St.Louis. The leg from Chicago to St. Louis is scheduled to be flown in two hours. Because of delays in Chicago, the leg is actually flown in two hours and 15 minutes. This pilot will now be paid a total of 15 hours and 15 minutes of pay for his three day trip since the actual time of the leg, 2 hours and 15 minutes, was 15 minutes longer than the scheduled time of 2 hours.
On the return leg from St. Louis to Chicago, the trip is once again scheduled to be flown in 2 hours. The actual flight time of this leg on the return trip takes one hour and 50 minutes, ten minutes less than schedule. Since the scheduled time was two hours and the actual time flown was one hour and 50 minutes, this pilot will be paid the greater of schedule or actual or in this case, the scheduled time of 2 hours. His total trip pay still remains at 15 hours and 15 minutes, the original trip projection of 15 hours plus the additional 15 minutes flown on the first leg.
This provision has been in the pilot contract for decades, because previous management representatives understood its need.
For much of it’s more recent years, American has been managed by finance managers not operations managers. Every CEO at American since Bob Crandall’s appointment in 1985 has had a background in finance. Every one of them, Carty, Arpey and now Mr. Horton was groomed from within under the same corporate philosophy and culture that has existed at American for the past two decades.
When you look at the names of the most successful airline executives over the recent past, with the exception of Mr. Crandall, every one of them were NOT finance managers. Herb Kelleher of Southwest was a lawyer by trade. Gordon. Bethune at Continental was a mechanic and most recently Richard Anderson, the current CEO of Delta, is also a lawyer. By contrast, American Airlines has never had anyone other than a finance trained CEO since 1985 and every one them is a product from within.
Apparently, American has lost its understanding of how parts of the airline operation actually work. Financial managers are great with spreadsheets, P & L’s, financial calculators, and talking to analysts, but how well has that translated into understanding how to operate an airline?
AMR management no longer wants to pay pilots the greater of scheduled or actual flight time on a leg by leg basis. Instead, they propose paying pilots based on the greater of scheduled or actual flight time on a sequence basis (the entire three day trip) but how well did they think this one through?
Using the same example as above, under management’s proposal:
A pilot is scheduled to fly the same three day trip that pays 15 hours of total pay. On the first leg of the trip, the pilot is scheduled to fly from Chicago O’hare to St.Louis. The leg from Chicago to St. Louis is scheduled to be flown in two hours. Because of delays in Chicago the leg is actually flown in two hours and 15 minutes. This pilot will now be paid a total of 15 hours and 15 minutes of pay for his three day trip since the actual time of the leg, 2 hours and 15 minutes, was 15 minutes longer than the scheduled time of 2 hours.
On the return leg from St. Louis to Chicago the trip is once again scheduled to be flown in 2 hours. The actual flight time of the leg on the return trip takes one hour and 50 minutes, ten minutes less than schedule. Since the scheduled time was two hours and the actual flight time was one hour and 50 minutes, this pilot will be paid the actual time NOT the scheduled time for this leg, or in this case, one hour and 50 minutes. The total trip pay is then reduced by 10 minutes since he had over flown on another leg. After the first leg from Chicago to St.Louis the pilot’s pay increased from 15 hours to 15 hours and 15 minutes because the first leg took 15 minutes longer than schedule. The 15 hours and 15 minutes is then reduced by 10 minutes (the amount under flown) to 15 hours and five minutes because on the St. Louis to Chicago leg he flew less than schedule.
Under management’s proposal if any leg is under flown it will have the effect of reducing the pilot’s pay if any other leg within the sequence was flown greater than scheduled.
Back to the discussion of financial managers, spreadsheets, and calculators…Ignoring the operational realities, from a strict academic financial perspective, this spreadsheet’s output makes financial sense. A person who does not understand an airline operation would conclude--as AMR management apparently has--that you would save money under AMR management’s proposal because you could pay pilots less. The proof is in the spreadsheet right? Wrong! Why? Because spreadsheets don’t fly airplanes, pilots do.
But here is where the difference is highlighted between financial managers and managers that understand how an airline operation actually works. Under management’s proposal, if a pilot flies less than the scheduled flight time on a flight, he would reduce his pay if he had flown over on any previous leg as in the example above. So ask yourself this, if management implements their proposal, in the future what Captain at American Airlines would ever under-fly a flight if it resulted in a pay cut for him? The flight will only move as fast as the Captain wants it to.In other words, will there ever be another early flight arrival at American Airlines again under this proposal?
This is the very reason that managers in the past at American Airlines and the other airlines agreed to the current system of paying the greater of schedule or actual on a leg by leg basis and not based on the entire sequence. Managers in the past understood how the operation of an airline actually works; spreadsheet-based conclusions that ignore predictable human behavior and fail to account for the practical nature of a work rule in the real world airline operation are faulty conclusions that are not credible. Most importantly, they fail to provide the solid foundation upon which to form a viable business plan.
Senior AMR management is trying to convince the Unsecured Creditors Committee, the Court, the public, and their employees that they have a viable business plan for the future. At the same time, the AMR managers that are actually running the day-to-day operation of the airline are trying to implement policies and procedures that will predictably result in a reduction of the flight schedule reliability which most certainly will also result in dissatisfied customers and ultimately an airline with a declining revenue base. Is this really the basis of senior management’s proposed business model for the future?
If senior management is ever going to convince the Creditors Committee, the Courts, the public and their employees that they are truly trying to turn the page to a new chapter they must first understand that apparently some of their management team is not yet reading from the same book.
Does management really understand what they are proposing?
