Exclusive: Thursday’s Tense Showdown Between American Airlines CEO and Flight Attendants Union Head
Following Thursday’s American Airlines earnings call, senior management held a company all-hands “State Of The Airline” address. Over 4,000 employees tuned in live to the presentation and question and answer session, and a recording was placed online. (View From The Wing reviewed a recording of the event.)
After talking through the news around his own compensation, CEO Robert Isom laid out where things stand with the company’s offer to flight attendants. This proved to be setting up the most dramatic moment of the event, so I want to offer an extended quotation where he laid out that they’re increasing their contract offer based on Delta’s recent 5% pay increase announcement.
I want to pay them at the best in the industry. And right now every offer that we put on the table for our pilots, for our dispatchers, for our agents, has been consistent with that philosophy.
And during those negotiations in which we were ultimately able to reach really nice satisfactory agreements, there were changes that happened in the marketplace, where our offer was such that it was leading but then somebody topped it. And in every one of those cases we went and adjusted our offer so that we were consistent with that philosophy.
We are using that absolute same philosophy with our flight attendants. And we have to – we have to be fair across the entire company, we have to be consistent with what we do.
And so I’ve been pleased with having an industry-leading offer on the table. The marketplace has changed. It changed when Delta put in place a new pay structure. Now, their pay structure’s not contractual. They don’t have to sign on it. And they aren’t held by the work rules that they’ve established.
But I’m willing to sign up for that, and I’m also willing to commit – the company is willing to commit – that we will match that. There’s still a lot to do. We can’t negotiate here. But I want everybody to understand that we will live by our commitment.
And that commitment as I know today will result in 25% pay increase day of signing, and that’s made up of 17% increase in wages, and another 8% that will represent boarding pay. And it also includes 401k increase from 5.5 to 9%, and profit sharing increases.
Isom talks about Delta’s compensation, and Delta had been the clear leader. But their increase also follows a new contract at Southwest. He doesn’t mention Southwest – where flight attendants didn’t just get a big raise but also retro pay to make flight attendants whole from the time since they’d last had a new contract.
American’s flight attendants want more pay and they want retro pay also – the raises they would have gotten if they’d received a new contract four years ago. Delta, for what it’s worth, says that their pay is still as high or greater than Southwest’s under certain conditions (such as 80 hours of flying per month).
During question and answer time, flight attendants union head Julie Hedrick asked employees in the room whether any of them had gone 5 years without a raise? And she said that the new industry standard is Southwest Airlines – and that Isom’s word for an industry-leading contract means surpassing Southwest. The board’s analysis for Isom’s compensation includes Southwest as one of his comps.
Isom responded that Southwest has a very different contract – work rules, network, and that take home pay of a Southwest flight attendant isn’t higher than at Delta.
When Julie Hedrick pressed Isom to instruct his team to include Southwest Airlines in their economic analysis, he responded “I’m not going to tell you I’m going to do something that I won’t do.” And he said he wouldn’t engage in “cherry picking.” That’s when Julie Hedrick walked:
Pres Hedrick to AA CEO Isom: “@AmericanAir Flight Attendants are ready to #strike. If you want to push it any further, push it. We are ready.” #1u #corporategreed pic.twitter.com/njHYNTSJNP
— Association of Professional Flight Attendants (@APFAunity) April 25, 2024
Isom responded that of course negotiations take into account Southwest. They need to get back to the table and get a contract done quickly, a strike won’t get a contract done, it has to be done through negotiations. And finally he reiterated the flight attendants deserve compensation increases, it’s been too long, and the team has to come together. The rest of the room full of employees applauded.
Flight attendant leverage here is a strike. They need the National Mediation Board’s permission to do that.
- As we approach the election, that becomes harder. A majority of the board was appointed by the President, and a major airline strike hurts him politically (but siding against labor hurts him with his base). The best thing for the President’s re-election is either a contact or delay until after November 5.
- American increasing their economic offer makes it more difficult for the National Mediation Board to conclude that negotiations are at an impasse which is the standard for releasing the parties into a 30 day ‘cooling off period’ before a strike.
- Flight attendants can’t manage a protracted strike, without pay. The union lacks the resources to fund employees with significant strike pay. Flight attendants don’t generally have the same resources as work groups like pilots in being able to funds themselves in the interim. That’s why the union has talked about targeted specific flights on specific days, so that most flight attendants keep working most of the time (and getting paid).
Cabin crew actually need a deal quickly, and probably benefit from one more than the company. While no new contract is in place, American is saving money – still paying flight attendant wages last adjusted in 2019. And there’s been over 20% inflation eroding their wage value since then. First and second year flight attendants based in Boston qualify for food stamps and a new contract fixes that.
Any deal ultimately looks something like Delta’s wages and boarding pay. The flight attendants union says they want more than this, but American isn’t in a position to pay more. What’s really changed is Southwest offering their cabin crew retro pay – which can be five figure payouts for some crewmembers.
There’s a reason that Isom talks about matching Delta and why he mentioned Delta’s recent 5% raise on the airline’s earnings call. He doesn’t really want to talk about Southwest. However it’s going to be hard to reach a deal without a meaningful signing bonus. In the meantime, the most junior flight attendants are the ones that suffer most – a function of the way that the union negotiates contracts to distribute pay disproportionately to its more senior members.
