An American Airlines Employee Pressed The CEO to Name One Way He’s Sacrificed. He Couldn’t Do It.

American Airlines mechanics are unhappy. They don’t have a new contract with airline. They were given a raise without a new contract, so there’s not as much money on the table as there otherwise would be. And management wants to be able to outsource more work than is done today.

The airline’s executives host town hall sessions (“Crew News”) and after each quarterly earnings call the airline’s CEO Doug Parker and many of his top executives meet with employees for a State of the Airline discussion. They take questions and they offer answers. Sometimes those answers are unpopular, often they’re incredibly illuminating about the state of the airline industry. It’s fascinating when those conversations get shared with me.

Last week’s State of the Airline offered what was easily the most awkward 2 minutes and 51 seconds of any such session I’ve ever heard when one employee asked about mechanic outsourcing, “why do you take away our jobs?”

Doug Parker pointed out, “Our contract has much more of our work done in house than any other airline does. We’re happy about that and we’re proud of that.”

But there are some functions like de-icing that they want to have done by other firms,

What we don’t want to do is go to a point where we have to bring in even more than we have today. The contract we have in place protects all of our team members and all of our jobs and has by far the most work done in-house than any other airline does.

The mechanic then says employees have sacrificed a lot, “what have you guys sacrificed?”

Parker replied, “I don’t understand the question [unintelligible].”

So he repeated, “what have you guys sacrificed, that’s my question.”

And Parker tried to evade: “Fair enough. Let me get back through instead though to the question about outsourcing and what we’re doing about it.”

The employee wasn’t having anything of that. He wanted to know what Parker has sacrificed?

Parker stammers a bit, and then gets going,

Oh, I, I…it doesn’t matter, I could answer that question but it’s just going to sound like I’m just telling you all sorts of stuff.

I’m blessed. I’ve had a really great life and I’m really happy about it and what I really want to do is make sure we’re doing everything we can to take care of this team.

So while we’ve all made sacrifices, some are greater than others, and what we want to go do is make sure we’re doing everything we can to take care of this team, ensure we have a competitive business that can be here forever and take care of our team members as we believe we should.

I know the contract does that. It allows for many more employees at American Airlines doing the work than are done at any other US carrier and we’re proud of that fact. As we get that done it’ll be the case when we’re done.

And while we are doing some work that is not – that other carriers don’t do at all – that is not core to, for example, fleet service or mechanic work, those individuals that are doing that work are protected while we do that.

And what you’ll see us doing over time is us hiring more and more people into those professions not fewer because we’re going to grow the airline and we’ll need to do that.

The truth here is that Parker has several good points to make.

  • It’s an industry standard practice to do some work with an airline’s own employees, and some work through outside firms. Contra claims by the union there’s literally zero risk to safety by doing this and in fact the airline’s incentives will be to improve safety.

  • Doug Parker does not take a salary. He receives grants of stock. To be fair that doesn’t mean he isn’t compensated, he’s well compensated even with the airline’s stock poor performance. [Sidenote: I’d love to see the heads of each airline’s frequent flyer program compensated in miles to better tie their pay to the value of the currency they’re creating.]

  • He didn’t ask for legacy American Airlines mechanics to offer givebacks. He didn’t foster great union relations at US Airways but he wasn’t around American Airlines after 9/11, during the Great Recession, or during the airline’s bankruptcy. Indeed, he gave out raises without asking anything in return (which I believe was a strategic blunder).

What has Parker sacrificed? He gave up his salary. But he’s never asked American Airlines employees to give up theirs.

The problem here isn’t Parker’s lack of sacrifice. There’s no question that the airline’s CEO is all-in with the airline. The problem is that Parker doesn’t connect with his employees and challenge them to a purpose that’s bigger than themselves. That’s what sacrifice gets to: employees feel like they’ve put their skin in the game with the airline and it has to mean something.

The carrier doesn’t have a mission statement. It’s not obvious what everyone is supposed to be trying to do, what they’re supposed to be working and fighting for. Is it the very survival of the company? Is it to overcome an external threat? Is it to be the very best in the world?

Employees need to be compensated fairly but ultimately whether they’re happy and perform well doesn’t depend just on money. People need to respect their colleagues — so if everyone else around is shirking or performing poorly and facing no consequences it’s tough to stay motivated — and people need to believe they’re working towards something bigger than themselves and their paycheck.

For years Parker would write a letter to employees outlining his pay and how it compares to comparable airline CEOs. It was generally less. He can say earnestly that he’s given up his salary entirely because he’s all in with the company and he’ll do well when the company does well.

He wasn’t around American during the time of great sacrifice, but he’s grateful for that sacrifice because the employees have made American Airlines what it is today.

Then he needs to tell everyone what they’re doing here that’s beyond money — what mission they’re on together and connect that to improving their livelihoods. And then he needs to tell everyone a plan to accomplish that goal. It needs to be credible, and he needs to back it up.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. As unsympathetic a character as Parker is, the unions are even less so. As you point out, their out of cycle pay increases were perceived as a sign of weakness by Parker and at least as it relates to the customer facing union people, their attitudes are generally as diffident as ever.

  2. Great post. This one hit me like a hammer:

    “Sidenote: I’d love to see the heads of each airline’s frequent flyer program compensated in miles to better tie their pay to the value of the currency they’re creating.”

    I mean, bingo. Genius. Exactly.

  3. You can see the major disconnect between leadership and employees, that is the foundation of the issues for AA. These town hall meetings are just for show rarely does anything come from it that benefits the employees. They are meant to open up communication but clearly it’s not happening. Employees should already know how he has sacrificed by them seeing his actiions everyday. Perception is each persons own reality.

  4. The problem is, Gary, that the mechanics incentives are completely different from those of the CEO.

    He does well when the company does well. But do the mechanics see a similar, proportional upside?

    The mechanics do well when…well, that’s a good question, isn’t it?

    If the CEO gets fired, does he need to work again, or will he have retained enough upside to not have to look for a job? Do his flight benefits get taken away? What about if you’re a mechanic?

    This is the root of the problem.

    Incentives need to be aligned with pay, and “skin in the game” does, too.

  5. Well said. I understand and feel for all sides here. I don’t know if making Doug feel bad or awkward helps anything and honestly there is no good answer to that question, no matter who it is asked of. Either the answer is obvious and unquestionable or it would be considered petty and out of touch.

    Nice that he shows up and takes questions I like that I also think off cycle pay raises are pretty nice too.

  6. I think Marcus Lemonis should work with American Airlines on this season of The Profit on CNBC. I’m not in business but that guy seems to care as much about the people who run his companies and the product they offer as he does making a profit.

  7. [Sidenote: I’d love to see the heads of each airline’s frequent flyer program compensated in miles to better tie their pay to the value of the currency they’re creating.]

    This is more pseudo-intellectual Panglossian nonsense that so often appears in pseudo-libertarian circles.

    It’s obvious that the value to an airline of the head of the frequent flyer program (and thus, what they “should be” compensated on) is how much value they remove from the frequent flyer program. Those miles are a liability, not an asset, and if they can figure out a way to make them worth a half cent rather than one cent each they’ve benefited the airline’s bottom line.

    The notion that the value of miles to the company and to the members of the program is aligned derives from a pre-disposition to believe that whatever is good for the business must ipso facto be good for the public.

  8. At some point an Administrator needs to appeal to employees as a person, Parker clearly is not a people person and is not the natural leader that so many companies search for. AA’s Board needs to recognize this; if the Board hopes for a turnaround at the company then the employees need to be actively engaged in improving the product, not just collecting a paycheck. Parker clearly doesn’t know how to motivate his employees, he made that clear with the unsolicited pay raise. A pay raise to an unhappy employee might delay their departure but it leads to an unproductive employee before departure happens.

    I’m amazed the Board hasn’t acted yet in making a change at the top. As long as they empower Parker to run things into the ground he will, all because he doesn’t know any better. This blunder is squarely on the Board’s shoulders…

  9. The idea anyone be paid in airline miles in lieu of cash is ridiculous. Airline miles are a limited currency with no ability to be exchanged for goods and services in the same way cash is. What good is billions of airline miles in your FF account when you need to pay for food, mortgages, energy bills, and a thousand other things cash is needed for?
    At least stock can be converted to cash pretty quickly, even if it’s value varies according to the fortunes of the underlying business. In the case of AA though, the value of the stock is in a downwards trend, but if you are being showered with more than you will every likely need, it is not especially relevant. Can’t see Dougie lining up for food stamps any time soon.

  10. They have a clear mission – “Going for great”

    Honestly, what was the mission when Bob Crandall was around? He simply got results and didn’t pretend to make friends with the unions. They respected him because he grew the airline profitably.

  11. @Greg: Going for great? Really? When does this start, or, as many might think, did it fall in a heap at the first hurdle? LOL!

  12. As an American Airlines flight attendant of over 20 years I appreciate his talks with the employees, but I wish he could make friends with Wall Street !!

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