American Flight Attendants Visit Analysts

DALLAS (TheStreet) -- Leaders of American's(AMR_) flight attendants met with Wall Street analysts Thursday, challenging the perception that the carrier's principal problem is high labor costs.

"The major focus was to dispel claims made by American and unfortunately perpetuated by some of you that labor is the problem at AA," Laura Glading, president of the Association of Flight Attendants, told reporters on a conference call.
"What's wrong with American is not labor but [rather] its failure to keep pace with its competitors in revenue," Glading said. A report prepared by the union notes that American's revenue per available seat mile increased by 11.1% in the first nine months of 2010, sixth among the six largest carriers including Continental. During the same period, United(UAL_) RASM grew the most at 21.6%, while Delta(DAL_) RASM, in fifth place, grew 13.6%.

American has said its cost disadvantage is about $600 million annually. The number represents the carrier's calculation of the average of comparisons if other carriers' contracts were in place at American.

In a prepared statement, American spokeswoman Missy Latham reiterated that "American has among the highest labor costs in the industry, particularly after bankruptcy enabled legacy competitors to cut their costs." She said the $600 million figure "is roughly about a third wages, a third work rules and a third benefits.

"We calculate this disadvantage by taking the wages, benefit costs and work rules at other carriers and applying them to our workforce," Latham said. "The cost difference by carrier ranges from about $200 million up to $1 billion -- taking the average of the carriers gives a difference of about $600 million. In order to position the company to succeed in the long-term, we must ensure our costs are competitive with our industry peers."

Dan Akins, a labor economist contracted to APFA, said analysts agreed that the differential in RASM growth "doesn't seem to be linked to knee-jerk cost issues." He noted that American will likely be able to increase RASM more quickly now that it, like competitors, has anti-trust immunity with partners across the Atlantic and Pacific.

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