Flight Attendants Earn Deserved Raise
This week, American Airlines flight attendants received welcome news that they will now earn 33-36% more. While the agreement is 250 pages long, the Executive Summary is a brisk 52 pages. Here are some highlights according to that summary:
“This 2024 Tentative Agreement adds 4.2 billion dollars in value to our contract over five years.
Five-year duration.
Pay scale increases of 33%-36% over five years.
$4.2 billion total increases in pay rates, 401(k), per diem, profit sharing, boarding pay premium, retroactive pay, and other items.
$160,000 average increase in value per active Flight Attendant over five years. Industry-Leading compensation (Average Pay + Boarding Pay).” – AFPA
The union that manages the labor group, Association of Professional Flight Attendants (AFPA), fought the airline hard for wage increases including possible strike action, and was clear with its 28,000 members and the public throughout the process.
Plainly, not only do I feel sorry for American Airlines flight attendants that they have not been able to secure meaningful contract updates over the last five years, but further, these don’t do as much as they look like on paper.
For example, official inflation rates through 2023 place a 21.8% inflation rate over the period but a total inflation number (including 2024 cumulative) puts it closer to 29%. In essence, in real dollars, this same raise in 2019 would have amounted to a 4% increase all things being equal. It’s also important to note that those inflation numbers exclude food and energy, the latter of which is up 38% over the same period.
In essence, flight attendants absolutely deserved the raise but while 33-36% looks big now it’s basically the same buying power of their last contract, likely behind inflation at its conclusion.
An added bonus is pay for boarding which is long overdue but a fantastic win.
Management Has No Plan To Pay For This Increase
The truth of the matter is that American Airlines is reporting a loss for the current quarter and while it has complained about capacity issues, it’s not doing a great deal to combat it. It reported in a mid Q2 advisement to shareholders that overcapacity was responsible for 5-6% lower revenue for the quarter and all signs point to that remaining throughout the year. Yet American is only drawing down capacity by 3.4% through December. One might have expected for American to reduce capacity by at least 5-6% to return to even capacity but doesn’t break that number until well into next year, achieving just 6.9% one year from now.
That’s not an aggressive plan to attack the capacity concerns.
American Airlines has shown no ability to turn a profit from its core business of flying passengers and things. Its loyalty program has been the only bright spot over the last decade occasionally producing profits. The stock price is historically low (including during COVID), the company has more aircraft than any other in the world, and depending on the month, flies more passengers than any other. Yet, it’s market cap is 75% lower than Delta ($6.97bn to $28.48bn.)
Then there’s the staggering debt.
“By the close of 2019, the burden had ballooned to almost $25 billion. Due to losses not covered by the huge federal aid package granted during the COVID meltdown, America’s borrowings expanded to $29 billion in Q1 of 2021. Since then, it’s wrestled the number to $25.5 billion as of [Q3 2023]. Still, American’s carrying about twice the approximately $13 billion loads at Delta and United. (Southwest has zero net debt.) American’s also paying around $1.5 billion in interest annually, including what it’s collecting on its cash horde. Once again, its overall interest bill is about twice that of its two biggest rivals.” – Fortune (emphasis mine)