What Kind of Culture Change?

Culture of Excuses vs. Culture of Excellence

On Wednesday afternoon, May 18, the APA Board of Directors met with American Airlines Chairman and Chief Executive Officer Doug Parker, President Scott Kirby, Executive Vice President-Chief Operating Officer Robert Isom, and Executive Vice President-People and Communications Elise Eberwein. We have included transcripts of the statements board members made to the senior executives here.

APA called for the meeting to discuss American Airlines’ failing corporate culture and to hear management’s plan for long-overdue culture change. Unfortunately, the meeting only served to confirm that management has no actual plan for producing a culture of excellence. Management seemed only to produce excuses.

After months of ongoing engagement with management, we’re seeing minimal movement in addressing implementation issues and grievances, negligible progress in halting deliberate contract violations by Scheduling, and continued contract interpretation disputes with Labor Relations. Even when it seems as if we’re nearing agreement, we often wind up at an impasse that creates more “negative surprises” for our pilots and their families.

During Wednesday’s high-level meeting and subsequent contacts with management, APA heard a series of excuses about why American Airlines’ culture is failing. These excuses ranged from “IT resources to solve pilot IT issues have been committed elsewhere,” to “we’re just not far enough along in the merger,” to “Delta is ahead of us.” While the excuses were accompanied by promises to do better, they all point to the same thing: Management has no specific plan for effecting culture change.

Instead, management expressed the view that all seemed to be “well on track,” myopically citing an improvement in D-0 performance. Management apparently interprets that improvement as an indication pilots are satisfied. In fact, management went so far as to state that the airline’s current operational numbers are the “best they have been in a decade” and specifically asked the APA board to thank the pilots.

Management reiterated its commitment to departure time minus 10 minutes (“D-10”). Regardless of the circumstances or pilot input, a centralized directive to slam the door on our customers at D-10 is to evidently be the foundation for improving our industry-trailing operational performance.

Management also reaffirmed its view that any contractual improvements need to wait until the next contract, with no plans for discussing anything of monetary value until our contract’s amendable date in 2020. In effect, management intends to try building a premier airline while clinging to our bankruptcy-era contract.

The APA Board of Directors specifically cited Labor Relations as an impediment to meaningful culture change. One recent glaring example occurred during our investigation into the proposed pilot profit-sharing plan. During our due diligence, we asked Labor Relations numerous questions, including whether pilot profit sharing was to be pensionable. The initial answer was “no.” Their reason was that all employees would be treated the same. However, during our follow-up investigation, we learned that profit sharing would in fact be pensionable for all other employee groups.

Labor Relations’ attempt to segregate the pilot profit-sharing plan exemplifies a culture of disrespect and division. After APA highlighted this egregious omission, management changed its position and is now offering profit sharing that is fully pensionable for pilots as well.

The APA Board of Directors also characterized management decisions to spend billions on share buy-backs while driving up debt as eerily reminiscent of ex-CEO Don Carty’s approach during the late 1990s. Mr. Carty was handed a vibrant, profitable enterprise and proceeded to burden it with debt, dilute the brand through heavy outsourcing, and aggressively repurchase shares of AMR stock. When the inevitable downturn arrived, he expected the employees — in particular, the pilots — to pay the bill. We are not willing to stand silent while history is repeated.

Our pilots’ total compensation (pay rates plus profit sharing), work rules and benefits continue to trail Delta and United, with no-near term corrections in sight. In fact, our pilots are still awaiting contractual improvements to be implemented that the membership approved long ago. From duty rigs that compensate our pilots far less than Delta and United pilots (and generate 19-20 days away from home), to long-term disability limitations and caps that deeply trail competitors, to lack of A-1 “must travel” status when returning home from a company assignment, to an onerous reserve-duty work life, a definite bankruptcy-era mindset continues to prevail.

As for profit-sharing, management provided a method for calculating the level of profit sharing for each individual pilot using the average of 2014 and 2015 pre-tax profit levels ($4.2B and $6.3B, respectively). The company’s average pre-tax profit estimate for individual profit sharing equated to 2.9 percent of an individual pilot W-2. For perspective, Delta and United pilots’ 2015 profit sharing paid in 2016 was 21.4 percent and 13 percent, respectively.

Management’s dismissive attitude and lack of any coherent plan to effect culture change at American Airlines has led the APA Board of Directors to explore other avenues for engaging with management, along with ways to engage our membership. Using the images and words from the Threat Error Management (TEM) model, from a culture perspective we have now clearly moved out of the GREEN and into the YELLOW. Contrary to management’s claim that it “owns” this issue, a culture of excellence will only be attained through effective engagement by the membership at large.

APA has allocated $1 million for the upcoming fiscal year to support the Contract Compliance Committee, and we have been compelled to increase contract administrator staffing to handle the wave of contract violations and implementation issues. We’ve received a record-breaking 120 contractual observer reports in one month, while paycheck mistakes have been rampant. Whether the problems we’re seeing are the result of negligent behavior or by intent, either one fosters distrust.

APA has invested a great deal of effort into bringing about culture change and remains committed to achieving the following objectives:

• Stopping the contractual/legal abuses by the Company;
• Effecting implementation of contractual provisions agreed to in the joint collective bargaining agreement; and
• Effecting/facilitating lasting and durable cultural change.

We will continue to engage management when it provides value to our members, but we cannot condone any “leap of faith” that isn’t accompanied by a concrete plan. Genuine culture change must recognize and address the disparities between our working agreement and those of our competitors. At this point, management’s view of culture and the changes that are needed sharply diverges from our own. Culture on the cheap seems to be management’s real target. 

As Delta’s CEO has stated, “American will never be able to compete with Delta because they don’t invest in their employees like we do.” If management is sincere in its desire to compete with Delta Air Lines, that must change.