American Airlines pay raises right to ignore Wall Street's myopia. But beware repeating history

A major priority for US Airways' management in its pursuit of, and eventual merger with, American Airlines was improving a fractured relationship with American’s beleaguered employees, who had endured years of rocky relations with management prior to the airline’s 2011 Chapter 11 reorganisation. Executives of US Airways, who became the new American’s management team, engaged American’s employees during the pursuit of American, promising a complete overhaul of the fractured employee-management ties of the old regime.

Management has charted mixed results in its efforts; however, American's executives have largely worked to live up to their pledges. In 2015 they brokered industry leading contracts with large labour groups that set off a round of tough collective bargaining industry wide as pay rates moved to the right. In 2016 American also reversed an unpopular decision (albeit previously agreed) to cease profit sharing after an outcry from labour.

During 2016 and 2017 American’s pilots and flight attendants have become more vocal about pay rates at other US airlines that have leapfrogged their own. The result was American’s unprecedented decision to offer pay raises mid contract in order to reinforce its commitment to genuine culture change, and the value that management assigns to the employees' contribution to a changed airline and industry.

A strong backlash from Wall Street after American outlined plans to offer employees raises was neither surprising nor unexpected, and reflects the challenges US airlines face as they try to balance shareholder responsibility with ensuring a positive work culture. Those two concepts should not be mutually exclusive, but investor distaste shows an intolerance for making monetary pledges to effect culture change. Sometimes management has to prepare for the longer term and ignore the short termism of Wall Street.

This CAPA Premium Analysis article is 1,382 words.

To access CAPA Premium Analysis you need a CAPA Membership

Your window into the latest insights

CAPA employs an industry-leading Analyst team based in Europe, North America, Asia and Australia who offer unique perspectives and independent and accurate commentary of critical industry developments globally. CAPA Members rely on our Analysis to unlock valuable insights and actionable intelligence to keep ahead of the game.

Big picture strategic view

Our Analysts don’t just report the news - they take a big picture strategic view of aviation dynamics, issues and trends and analyse the implications of these developments for you.

Global intelligence

The CAPA Analyst team is based globally to ensure our CAPA Members have access to independent, unique perspectives covering an entire spectrum of daily, worldwide commercial aviation developments.

Customise your Alerts

CAPA Members can use CAPA Alerts to receive daily, weekly or monthly and customised updates on our Analysis.

I'm very impressed by the factual and detailed analysis CAPA is always doing.

- CEO, Airline Member
To learn more, contact us:
Phone: +61 2 9241 3200 | Email: membership@centreforaviation.com