Heavy Weather At American Airlines Essay, Research Paper

Heavy Weather at American Airlines

Business Week

Heavy Weather at American

Jan.27 1997

pg 32

There is a big shake up at American Airlines. The pilots want more

money but management has already spent it. Another strike you say. Yip, looks

like it. The chief executive of American Airlines was stunned when on January

8, by an overwhelming vote, pilots rejected a tentative contract. Pilots then

got a message from the company president saying “For the first time in many

years, we fear for the future of our company.”

The reason that this strike could spell disaster for one of the leading

airlines in the world is the rather large order of new aircraft American ordered

from Boeing. American says that having to pay higher pilot salaries and buy new

aircraft makes it an uneconomical investment, in other words they can not do

both and still stay in business. A strike could even threaten a purposed

alliance with British Airways. American in not alone though. With industry

profits on the constant rise, employees of other airlines are pushing for higher

pay also, but undeniably American is in the worst position right now.

It looks to me like the pilots were not very happy with the decision to

purchase new aircraft from Boeing back in November when it was first voted on.

It seems as though instead of purchasing new aircraft the pilots wanted a pay

increase. What the pilots want is a pay increase of 11% over the next four

years. What the have been offered is a 5% increase. The argument that the

pilots have put forward is the fact that their offer does not even keep up with

inflation. It looks as though a strike would be very unlikely because of the

amount of money involved, somewhere around fifty million a day would be lost by

American. That big of a loss could be very detrimental to any company.

What can management do with a dilemma like this? It seem that they

departed without knowing where they were going to land. They should have made

sure there would not have been an uprising in any part of the company before the

took measures as drastic as ordering six-billion dollars in new aircraft. It

looks to me like there needs to be better communication between all facets of

management in this company.

The only way out of this mess that I can see is to reduce the order from

Boeing so that they can afford to give the pilots there precious pay increases.

This could cause more problems depending on how lenient the contract between

Boeing and American is. I’m pretty sure that Boeing would like to make some

money out of the deal too. So, I’m betting that if American wanted to make a

smaller order it would probably suit both companies better in the long run.

From the employees point of view, it would look like American is kind of

a greedy bunch. The pay raise that was offered does not even keep up with

current inflation rates, yet they can justify spending six-billion on new

equipment, when the truly do not need to replace it that quickly. A small scale

replacement of equipment would probably make everyone much happier.

It could get pretty messy in the end even if the strike ended. If

Boeing wants to be greedy about the whole thing, there could be lawsuits

involving breech of contract and all sorts of ugliness. I’m just glad that I’m

not in charge of cleaning up this mess.