AMR tumbles more than 10% after pilot contract proposal
 

From Bloomberg - snippet below. As of 11:52am ET on 11/15/2011, AMR is down more than 10% to $1.92, more than 75% off in the 52-week period.

Pilots want a 10% signing bonus and 7% pay raises for three consecutive years. Wow.


Not good.

http://www.bloomberg.com/news/2011-1...tml?cmpid=yhoo

American Airlines parent AMR Corp. (AMR) tumbled the most in six weeks in New York trading after trying to end a five-year stalemate with a contract proposal that offers pilots smaller pay increases than they had sought.

“The time has come to close this chapter and move forward,” American said yesterday on its labor website, urging the Allied Pilots Association to permit members to vote on the plan. The union’s board began a three-day meeting today.

Compensation and the scope of flying that rivals might do for Fort Worth, Texas-based American are the biggest unsettled issues in bargaining that began in 2006. American is seeking to cut labor costs and made the proposal as AMR directors prepared to gather tomorrow for their last scheduled session of 2011.

“Management is trying to put on a lot of pressure” to resolve the stalled talks, said Robert W. Mann, president of consultant R.W. Mann & Co. in Port Washington, New York. “If the gulf is wide, it’s not going to move. It will just go back for further discussion. It looks like the company is pretty frustrated right now.”

Wow, Indeed
 

Assume they have been doing some really serious drinking of late.

All I can say is Wow.

I wish I could get a 10% signing bonus and 7% raise for the next 3 years.

Do you fly 777s? I hear there's big demand for 777 pilots.

I could not have said it better. They really are living in la la land.

Supply and demand. If there's indeed a 777 pilot shortage, then these salaries and benefits make perfect sense.

I agree but I think part of it is meant to recoup some concessions made in prior years. The problem is every other airline imposed far more draconian concessions on their employees during bankruptcy, leaving AA at a huge disadvantage.

There is no shortage of pilots. There's a temporary shortage of pilots qualified on the 777 at AA because of a very large number of retirements over the past several months that exceeds AA's ability to immediately train and replace. But rest assured that it is temporary and will be solved prior to next summer's busy flying season. There's no shortage of pilots wanting to move up to AA's 777s at current pay rates - there just isn't enough training capacity to immediately train hundreds of pilots.

Retirements over the past three months have run at about 10 times the typical rate.

There is still a very big gap between what the pilot's union wants and what management is proposing.

Under one of American’s proposed pay plans, pilots would get a 4 percent average raise on the date the contract is signed, followed by a 3 percent boost after 15 months, and increases of 2 percent after 30 months and again after 45 months.

The second option offers a 5 percent average increase at signing, followed by a 4 percent jump after 12 months, a 2 percent increase after 24 months and 3 percent after 36 months.

Not to impugn the pilots, but is this the "rats from a sinking ship" phenomenon?

Partly. It's primarily because of a quirk in the pilot's pension that permits them the benefit of hindsight when they retire, by giving them a 60-90 day look-back at the asset values (different published sources reference 60 or 90 days). It's happened in prior years when the markets fall substantially - huge market declines generally cause a big uptick in early pilot retirements. The additional fear that AA might file for Ch 11 (and terminate the pilot pension) probably enhanced the number of early retirements over the past several months.

So when the stock market tanks, they can pretend they retired 60-90 days prior to their actual retirement and lock in the historic stock values. So on October 1, they could decide to retire but take the August 1 values (which were substantially higher). When the market is very volatile, this can mean tens or hundreds of thousands of additional dollars per pilot. It's a fantastic benefit that insulates the pilots somewhat from market volatility as their retirement date approaches.

It would be great to be able to sell equities today with the option of selling them for the prices those equities were worth 60-90 days ago, no?

Yeah, but you still wouldn't get the bonus and raise. :D

On the flip side, it'd be pretty awful to be counting on your retirement portfolio at age 65, only to have it lose half its value a few months beforehand. I'm very glad there are still some jobs out there that insulate their employees from these pitfalls.

Other international carriers such as EK, QR, etc. are hiring pilots. While its probably not the 100% of choice, they can retire, get their pensions and still work for another carrier (if that other carrier doesn't have a mandatory age-requirement for retiring). While its not post-retirement, I do know of one person who's brother was on the right side of an AA B777 for a number of years and "bailed ship" to QR to pilot their B777's.

Stock options.

I am more and more glad I did not do a Stardump in an effort to get to Lifetime Gold.