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American Airlines parent AMR's stock falls as exec awards due
Dallas Morning News ^ | 4/15/08 | Terry Maxon

Posted on 04/15/2008 10:46:05 AM PDT by cowtowney

As luck would have it, AMR Corp. couldn't have picked a worse time to reward its top people with company stock.

American Airlines Inc., its principal subsidiary, is coming off a week with 3,300 flights canceled due to inadequate inspections and modifications. And Wall Street analysts expect AMR to report a quarterly loss of around $300 million Wednesday, the parent company's worst first quarter in five years.

On top of all that, the company's stock price is trading near four-year lows – less than one-fourth the price 15 months ago.

Still, the company this week is set to distribute around 4.3 million shares, valued about $40 million – albeit the smallest distribution since the awards first angered unions and employees in 2005.

(Excerpt) Read more at dallasnews.com ...


TOPICS: Business/Economy; News/Current Events
KEYWORDS: airlines; americanairlines; executivepay
Let's see

Last week, 250,000 people get displaced because AA hasn't maintained their airplanes. AA blames it on the FAA, then this weekend, the Chairman apologizes and semi-takes responsibility.

Then today, they give themselves $40 million in bonuses. Meanwhile the stock was dropped from $32.3 to $8.3 in the past 12 months.

Now, the bonuses are for 2005-2007 and it is now 2008. And the FAA wasn't enforcing the wiring rules, so AA did not fix them. Nevertheless, the wiring should have been maintained properly.

Further, what does it say about an executive board that decides the day after the weekend from hell for travelers to give out $40,000,000 in bonuses? Could they have waited six months? Did it have to be the day after this weekend?

Do they even have a public relations department at AA? Do they even care? They may have a legal obligation to reward these people. Who is responsible for that?

Having flown on their airline numerous times and talking to their staff over the weekend...they were offensive and arrogant. It must start at the top and go down.

Since their stock price is down over 7% today alone (as of this posting), I see the market is rewarding them for their behavior. I'm not for any government intervention here. The market will take care of it. I just want AA to play on a level playing field and not get preferential treatment at DFW and Love Field (too late there).

1 posted on 04/15/2008 10:46:06 AM PDT by cowtowney
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To: cowtowney

“. I’m not for any government intervention here. The market will take care of it”

I’m not sure of that...our gov’t seems to want to bailout everyone these days.


2 posted on 04/15/2008 10:49:48 AM PDT by Slapshot68
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To: Slapshot68

Well I’M sure that I don’t want government intervention.


3 posted on 04/15/2008 10:53:20 AM PDT by cowtowney
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To: cowtowney
I'm not for any government intervention here. The market will take care of it.

Agreed. I'm betting they can't sell this stock for a while, and most stock is worth $0 in a bankruptcy.

4 posted on 04/15/2008 10:56:01 AM PDT by Young Scholar
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To: cowtowney
AMR couldn't find its ass with both hands. So corporate management gives itself a pat on the back for shoddy performance? Let's just say they wouldn't tolerate it from their own employees. The corporate culture speaks volumes about how the company regards its shareholders, employees and customers.

Not very much.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus

5 posted on 04/15/2008 11:06:38 AM PDT by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives In My Heart Forever)
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To: cowtowney
Do they even care?

About as much as the flight attendants on your last flight cared about you.

6 posted on 04/15/2008 11:08:26 AM PDT by paul51 (11 September 2001 - Never forget)
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To: cowtowney
Flying well over half a million miles a year with AA, I couldn't agree with you more about their public relations and customer service. It stinks and it's an embarrassment for an airline that claims itself to be the de facto national airline of the U.S. In short, as a customer-oriented business, they are a disaster and deserve the pummeling they are currently receiving in the market.

However, as a licensed A&P mechanic for better than 30 years, I take great issue with your characterization of AMR's failure to properly maintain their aircraft. You're simply regurgitating all the wrong info as misrepresented by the idiot media. I won't go into the technical nature of the issue, but suffice it to say that AA had implemented the AD addressing the aux hyd pump wire bundle well before the deadline specified in the AD. The issue with the FAA was AA's EOC used to implement the Directive - even though AA was the prime airline working with the manufacturer to develop the inspection criteria and the fix.

That the FAA would then turn around more than two years after completion of the AD and threaten AA with the grounding of their fleet, after the FAA was summarily accused by whistle blowers of pandering to the the very airlines they were supposed to be regulating, speaks volumes about the despicable effort to save face in front of Congress by the FAA.

I'm all for holding AA accountable for their vast failings as a major air carrier - and there are many - but shoddy maintenance ain't one of them. This episode with American was nothing more than a failing gov't regulatory bureaucracy run amok at the expense of a private business. And they're not done yet; there's plenty of pain to spread around to the other airlines in order to save face at the expense of the confidence of the traveling public.

Reagan was right: government is the problem.

7 posted on 04/15/2008 11:12:10 AM PDT by liberty_lvr
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To: cowtowney
While there are some at AA that share blame for the maintenance issues, obviously that is not true about all of them.

Bonuses are an important part of encouraging good management. Incentive programs work best when you reward people when they do at least some things right, and reward them much more when they do more right.

If you cut off the rewards for everyone whenever some one screws up, or even if you make someone ineligible for any rewards when they screw up, you remove the incentive to excel for the rest of the year.

These bonuses are also most likely rewards for last calendar year, and most of AA's declining profits are linked to the rising costs of fuel rather than things their management has control over.

However, since profits are declining, these bonuses are smaller than they have been in the past.

Do they even have a public relations department at AA? Do they even care? They may have a legal obligation to reward these people. Who is responsible for that?

So they should base bonuses on how the class warfare advocates will spin things? Yea, that's a great business decision.

8 posted on 04/15/2008 11:13:45 AM PDT by untrained skeptic
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To: paul51

“About as much as the flight attendants on your last flight cared about you.”

Actually, the flight attendants are generally very nice. The reservation people were the ones that were ill-informed, arrogant and condescending.


9 posted on 04/15/2008 11:16:19 AM PDT by cowtowney
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To: liberty_lvr

I agree that AA maintains there planes better than most.


10 posted on 04/15/2008 11:18:55 AM PDT by cowtowney
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To: cowtowney

“Since their stock price is down over 7% today alone (as of this posting), I see the market is rewarding them for their behavior. I’m not for any government intervention here. The market will take care of it. I just want AA to play on a level playing field and not get preferential treatment at DFW and Love Field (too late there).”

The incestuous relationship between the board of directors and executive staff has to be monitored, regulated, or somehow modified. This is not the first, nor will it be the last case of executive staff trashing a corporation, and being rewarded. The executive staff will prosper, the corporation is weakened, workers, customers and stockholders all pay the price for this.

It’s not criminal, but it should be.


11 posted on 04/15/2008 11:21:45 AM PDT by brownsfan (Algore makes P.T. Barnum look like a piker.)
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To: untrained skeptic

“Now, the bonuses are for 2005-2007 and it is now 2008” - perhaps you missed this in black and white.

I said - “Do they even have a public relations department at AA? Do they even care? They may have a legal obligation to reward these people. Who is responsible for that?”

You said - “So they should base bonuses on how the class warfare advocates will spin things? Yea, that’s a great business decision.”

They owe the bonuses, I’m pretty sure. Could they have put this off for six months? This has nothing to do with class warfare. It’s bad management and arrogance. They should have postponed it for six months and let the pain subside...NOT one day after their last public relations debacle.


12 posted on 04/15/2008 11:39:52 AM PDT by cowtowney
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To: cowtowney
They owe the bonuses, I’m pretty sure. Could they have put this off for six months?

How would you feel about having your pay check delayed six months?

13 posted on 04/15/2008 12:35:53 PM PDT by untrained skeptic
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To: untrained skeptic

“How would you feel about having your pay check delayed six months?”

Not good... but these are not paychecks. They are bonuses.

Hello!


14 posted on 04/15/2008 12:44:26 PM PDT by cowtowney
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To: cowtowney
Not good... but these are not paychecks. They are bonuses.

It's still part of these people's compensation.

I got a bonus last month for meeting goals the previous calendar year. It wasn't a huge bonus, but it was compensation for the job I had done, and it was money owed to me.

If the company had decided to withhold those bonuses for six months because they decided it was politically unsafe to pay us what we were owed when we were owed it, they'd have likely lost some of their most valuable employees and gotten themselves sued.

Just because it's a "bonus" doesn't mean it's not earned, not that they can arbitrarily choose to delay paying that money to their employees.

Bonus checks are paychecks. Just because those people's compensation is dependent on performance, and their pay isn't doled out in 26 equal, biweekly installments, doesn't make it any less of a paycheck.

15 posted on 04/15/2008 1:02:04 PM PDT by untrained skeptic
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To: untrained skeptic

“Just because it’s a “bonus” doesn’t mean it’s not earned,”

Nobody said that.

It’s bad PR. Does that concept sink in at all? You are an engineer. Try to think like a marketing person. There’s a big downside to this.


16 posted on 04/15/2008 1:08:12 PM PDT by cowtowney
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To: cowtowney
It’s bad PR. Does that concept sink in at all? You are an engineer. Try to think like a marketing person. There’s a big downside to this.

It's always bad PR to pay people management bonuses, because despite what you say, it is all about class warfare.

Does the fact that these bonuses are lower than in past years mean nothing to you?

Does it matter that this is for their past performance compared to other airlines?

Do the headlines say AMR execs get smaller than normal bonuses after a year of falling stock values? No. AMR is getting blasted for giving their executives any bonuses at all.

Yes, the troubles that they are having now are coming at a bad time, but they can't delay paying their people for the work they already performed.

If you try and run your company to avoid populist attacks from the media, you'll run your company into the ground.

AMR gets attacked EVERY year when they release how much they hand out in bonuses, and they always will.

It's actually probably not a bad marketing ploy to take the public relations hit all at once. While the grounding of their planes due to following what FAA inspectors would allow, not what they were supposed to be doing is something they might possibly been able to avoid. Getting attacked for giving management bonuses isn't something they can avoid, and I doubt the release of these figures is really significantly effecting their popularity with travelers who are already about as pissed of as they could be.

17 posted on 04/15/2008 2:16:21 PM PDT by untrained skeptic
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To: untrained skeptic

You don’t get it.

Stick to engineering.


18 posted on 04/15/2008 4:34:29 PM PDT by cowtowney
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To: cowtowney
I do get what you are saying.

However, AMR can't change the date at which they pay out bonuses.

Even if they could, changing the date would be done to try and change how those bonuses are perceived.

Those bonuses will never be perceived well, or even neutrally.

Even when AMR's business was growing and their stock value was rising, they got slammed for these bonuses. The bonuses are lower now, and they are admitting there are problems, while rewarding people for the things they did right. However, that's not what you hear from the media, because the truth doesn't matter to the media.

I'm not blind to the value of good marketing. I've gone on many sales trips with our sales and marketing departments to help land big deals.

However, you also have to realize that AMR has two audiences. Their customers and their employees, and they have to do what they can to please both.

In the case of the bonuses, they aren't going to please their consumers. They need to do what they can to reduce the amount that the bonuses irritate consumers, but that's difficult with the leftist media against them.

However, they can't afford to piss off their employees either. If they do, their efficiency will suffer as will their customer service.

What I'm saying is that doing something like trying to delay the bonuses is penny wise, but pound foolish. The gains are not as great as you seem to think they would be, and the costs are much higher.

19 posted on 04/16/2008 7:15:22 AM PDT by untrained skeptic
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To: untrained skeptic

http://finance.yahoo.com/q/bc?s=AMR&t=1y&l=on&z=m&q=l&c=

I can see they have followed your astute management advice


20 posted on 04/16/2008 8:05:41 AM PDT by cowtowney
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To: cowtowney
Looks to me like they are taking their hit, and are already starting to recover a bit. They're up 3% for the day.

However, looking at the stock price isn't really going to prove either of us right or wrong.

AMR's biggest his is going to be from having to cancel so many flights recently. They lost a lot of revenue from that.

As for future bookings, it's been proved time and time again that the biggest factor there is price. I'm very doubtful that there is even a noticeable dip in bookings when they hand out these bonuses each year.

21 posted on 04/16/2008 8:36:27 AM PDT by untrained skeptic
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To: cowtowney

http://dallas.bizjournals.com/dallas/stories/2008/04/14/daily29.html?jst=b_ln_hl


22 posted on 04/16/2008 2:01:53 PM PDT by cowtowney
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To: cowtowney

http://finance.yahoo.com/echarts?s=AMR#chart3:symbol=amr;range=1y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

And the stock just keeps falling


23 posted on 05/21/2008 12:24:34 PM PDT by cowtowney
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