Goodspeed
Well-Known Member
From Hard Landing: The Epic Contest for Power Profits That Plunged the Airlines into Chaos by Thomas Petzinger, Jr
Crandall brainstormed endlessly over this challenge with Carty and other members of his inner circle. Creating a new airline versus expanding the old airline; hiring new low-cost employees versus maintaining high salaries for veteran employees- these permutations eventually began to suggest an altogether different concept. "If we can't create a new airline outside of American," Crandall said, "we'll create one inside American."
Yes, that was it: two airlines, or more precisely, two separate and distinct workforces, each flying the same airplanes and the same routes. If you already worked for American Airlines, you job and salary were secure; indeed, you would continue getting salary increases. But for every person hired in the future- every flight attendant, pilot, baggage handler, ticket agent and mechanic- the story would be different. Each would come in at lower starting wages and in some cases reduced benefits as well. Through the years, as they gained seniority, this second category of workers would receive raises, of course, but they would remain on a lower scale than the older, more established employees, those lucky enough to have been hired by the early 1980s. In fact the new hires would never catch up. They would be perpetually confined to a second- tier status that the unions would come to call the "b-scale."
The faster American grew- a worthy strategy in any case, in the newly deregulated world- the more new people it would be able to hire at b-scale rates, and the lower its average labor costs would go. The bigger American became, the closer its costs would approach the levels enjoyed by New York Air and People Express.
Bob Crandall christened his newfound strategy with the pretentious name "the Growth Plan," although there was no disputing that the plan was something extraordinary. It was, to begin with, a major change in strategy for a corporation that had so far responded to deregulation by cutting back on its traditional route structure and getting rid of airplanes. In order for the Growth Plan to work- in order to hire enough new employees to drag down American's overall labor costs quickly- Crandall would have to launch the biggest expansion in airline history. And he would have to do this as airport capacity was tightening and as new competitors were continuing to flood the market, all in the face of higher fuel prices, stratospheric interest rates, and an uncertain market. But Crandall believed it had to be done: the top people at American were convinced that now, in the early 1980s, with upstarts popping up all over, the winners and losers were being permanently decided in the airline industry.
Part of the Growth Plan's genius lay in how diabolical it was. The one controlling obstacle to the plan, of course, were the unions at American. The very concept of a two-tier wage system ran 180 degrees counter to the fundamental all-for-one, one-for-all principles of unionism. But the Growth Plan was conspicuously structured to benefit existing union members, who in an expanding airline would enjoy vastly greater promotion opportunities, meaning that their salaries would increase even more than otherwise. The incumbent employees would reap this windfall on the backs of future employees, but what did it matter when the winners under this strategy were the only ones able to vote on the proposal?
After months of careful preparation Crandall and his people began to presenting the b-scale proposal to employees as their labor contracts approached expiration. Through the sale of stock and other means, American had accumulated a massive war chest, the means to win a war of attrition should the unions refuse to approve the two-tier wage scheme.
The first union contract to come up for renewal was that of the Transport Workers Union, whose 10,000 members represented mechanics and other ground employees. Nonunion replacement workers- scabs, in union parlance- were standing by around the country, collecting $25 a day just for waiting. Crandall and other company officials, often in the face of a booing and hissing crowd, were on the stump, pointing out that existing employees would benefit tremendously under the growth that would follow. Finally, with a strike imminent, the TWU relented. B-scales were born.
Members of the pilots' union were even less difficult to convince. A huge proportion of the pilots at American had been hired at one time, in the explosion of flying that accompanied the onset of jets in the mid 1960s. By the early 1980s many of the members of that bulging pilot class were still stuck in the copilot's seat. Crandall and his aides demonstrated that as American bought more planes- a fleet expansion made possible by hiring new employees at cheap wage scales- these veteran pilots would finally be thrust into the captains' seats, getting a big raise in the process. Crandall's task was made even easier by the fact that the pilots at American, though unionized, were not part of the Air Line Pilots Association, which represented pilots at all other union airlines. Dealing with a distant national leadership in Washington would have made b-scales a much harder sell.
The flight attendants required more convincing. The job of persuading them fell to Tom Plaskett, American's marketing chief. Seeking to neutralize the union's leadership, which was more outspoken than the membership, Plaskett met with flight attendants in small numbers, reasoning that it would be easier to intimidate the rabble-rousers from making speeches in a small room than an auditorium. Altogether Plaskett held 145 meetings with flight attendants, and he drew an ocean of tears in those meetings, by his later account. "Flight attendants deal with everything on a more emotional, visible level," Plaskett would explain. And as they cried still more, "It dawned on me: What was coming to the fore in their minds was, 'I'm not worth what I'm paid.' ...We're telling them, 'There's someone out there who's willing to do your job at half the price.'" In the end, as they watched the company training every secretary in corporate headquarters to act as a strikebreaker, flight attendants making $30,000 a year decided that they would stay on the job and allow American to hire future flight attendants at about $15,000 a year.
With his b-scales firmly in place, Crandall in early 1984 began unleashing orders for hundreds of new airplanes. Pilots, mechanics, and flight attendants flooded into American. The Dallas hub added new spokes. Still more planes and more employees came aboard. Despite the intractable recession, earnings soon reached record levels, enabling the airline to buy even more planes and hire even more people. Within a few years American was bringing in planes at the rate of nearly one per week and hiring as many as 1,000 new employees a month.
Crandall brainstormed endlessly over this challenge with Carty and other members of his inner circle. Creating a new airline versus expanding the old airline; hiring new low-cost employees versus maintaining high salaries for veteran employees- these permutations eventually began to suggest an altogether different concept. "If we can't create a new airline outside of American," Crandall said, "we'll create one inside American."
Yes, that was it: two airlines, or more precisely, two separate and distinct workforces, each flying the same airplanes and the same routes. If you already worked for American Airlines, you job and salary were secure; indeed, you would continue getting salary increases. But for every person hired in the future- every flight attendant, pilot, baggage handler, ticket agent and mechanic- the story would be different. Each would come in at lower starting wages and in some cases reduced benefits as well. Through the years, as they gained seniority, this second category of workers would receive raises, of course, but they would remain on a lower scale than the older, more established employees, those lucky enough to have been hired by the early 1980s. In fact the new hires would never catch up. They would be perpetually confined to a second- tier status that the unions would come to call the "b-scale."
The faster American grew- a worthy strategy in any case, in the newly deregulated world- the more new people it would be able to hire at b-scale rates, and the lower its average labor costs would go. The bigger American became, the closer its costs would approach the levels enjoyed by New York Air and People Express.
Bob Crandall christened his newfound strategy with the pretentious name "the Growth Plan," although there was no disputing that the plan was something extraordinary. It was, to begin with, a major change in strategy for a corporation that had so far responded to deregulation by cutting back on its traditional route structure and getting rid of airplanes. In order for the Growth Plan to work- in order to hire enough new employees to drag down American's overall labor costs quickly- Crandall would have to launch the biggest expansion in airline history. And he would have to do this as airport capacity was tightening and as new competitors were continuing to flood the market, all in the face of higher fuel prices, stratospheric interest rates, and an uncertain market. But Crandall believed it had to be done: the top people at American were convinced that now, in the early 1980s, with upstarts popping up all over, the winners and losers were being permanently decided in the airline industry.
Part of the Growth Plan's genius lay in how diabolical it was. The one controlling obstacle to the plan, of course, were the unions at American. The very concept of a two-tier wage system ran 180 degrees counter to the fundamental all-for-one, one-for-all principles of unionism. But the Growth Plan was conspicuously structured to benefit existing union members, who in an expanding airline would enjoy vastly greater promotion opportunities, meaning that their salaries would increase even more than otherwise. The incumbent employees would reap this windfall on the backs of future employees, but what did it matter when the winners under this strategy were the only ones able to vote on the proposal?
After months of careful preparation Crandall and his people began to presenting the b-scale proposal to employees as their labor contracts approached expiration. Through the sale of stock and other means, American had accumulated a massive war chest, the means to win a war of attrition should the unions refuse to approve the two-tier wage scheme.
The first union contract to come up for renewal was that of the Transport Workers Union, whose 10,000 members represented mechanics and other ground employees. Nonunion replacement workers- scabs, in union parlance- were standing by around the country, collecting $25 a day just for waiting. Crandall and other company officials, often in the face of a booing and hissing crowd, were on the stump, pointing out that existing employees would benefit tremendously under the growth that would follow. Finally, with a strike imminent, the TWU relented. B-scales were born.
Members of the pilots' union were even less difficult to convince. A huge proportion of the pilots at American had been hired at one time, in the explosion of flying that accompanied the onset of jets in the mid 1960s. By the early 1980s many of the members of that bulging pilot class were still stuck in the copilot's seat. Crandall and his aides demonstrated that as American bought more planes- a fleet expansion made possible by hiring new employees at cheap wage scales- these veteran pilots would finally be thrust into the captains' seats, getting a big raise in the process. Crandall's task was made even easier by the fact that the pilots at American, though unionized, were not part of the Air Line Pilots Association, which represented pilots at all other union airlines. Dealing with a distant national leadership in Washington would have made b-scales a much harder sell.
The flight attendants required more convincing. The job of persuading them fell to Tom Plaskett, American's marketing chief. Seeking to neutralize the union's leadership, which was more outspoken than the membership, Plaskett met with flight attendants in small numbers, reasoning that it would be easier to intimidate the rabble-rousers from making speeches in a small room than an auditorium. Altogether Plaskett held 145 meetings with flight attendants, and he drew an ocean of tears in those meetings, by his later account. "Flight attendants deal with everything on a more emotional, visible level," Plaskett would explain. And as they cried still more, "It dawned on me: What was coming to the fore in their minds was, 'I'm not worth what I'm paid.' ...We're telling them, 'There's someone out there who's willing to do your job at half the price.'" In the end, as they watched the company training every secretary in corporate headquarters to act as a strikebreaker, flight attendants making $30,000 a year decided that they would stay on the job and allow American to hire future flight attendants at about $15,000 a year.
With his b-scales firmly in place, Crandall in early 1984 began unleashing orders for hundreds of new airplanes. Pilots, mechanics, and flight attendants flooded into American. The Dallas hub added new spokes. Still more planes and more employees came aboard. Despite the intractable recession, earnings soon reached record levels, enabling the airline to buy even more planes and hire even more people. Within a few years American was bringing in planes at the rate of nearly one per week and hiring as many as 1,000 new employees a month.
