Monday, October 08, 2007

American Airlines Fights To Halt Worker Pay Raises, Even As CEO Pockets Millions


Workers at American Airlines agreed to wage and benefit cuts worth $1.6 billion when the company was on the verge of bankruptcy a few years ago. Thanks to the workers' sacrifice, American Airlines is profitable again.

Now, instead of rewarding its employees, American Airlines wants to halt worker pay raises.

However, there's one group of American Airlines employees who aren't being asked to share in the pain: the executives. Over the past couple of years, American Airlines gave stock bonuses worth $250 million to the company's executives and managers.

So much for "shared sacrifice."

American Airlines' CEO Gerard Arpey did particularly well last year. Arpey pocketed a $581,534 salary last year, along with $39,769 in other compensation. But that was chump change, compared with the $4.8 million in stock and option awards that Arpey received last year. And in April 2007, he pocketed a bonus of $6.6 million.

The American Airlines saga is just another chapter in the skyrocketing inequality that has taken place in America since Ronald Reagan declared war on labor unions in the 1980s. Indeed, the American labor movement never really recovered from Reagan's firing of 11,345 striking air traffic controllers in 1981.

Reagan, a former union man himself, stabbed the workers of the Professional Air Traffic Controllers Organization in the back. But worse than that, he gave a green light to corporate America to bust unions, ignore labor laws, and screw workers---a process that continues to this day.

As a result, America has been increasingly economically polarized since 1980s. The middle class is shrinking and inequality is at its highest level since the Robber Baron era of the late 1800s.

CEO salaries tell the story. In 1980s, the CEOs of Fortune companies earned about 42 times as much as the average worker. By 2000, CEOs were making over 500 times what the average worker earned. In 2004, the average CEO of a major corporation received over $9.8 million in total compensation.

This economic gulf is unique to America, by the way. In Japan, for example, CEOs only make around 17 times what the average worker earns. In Continental Europe, the multiple is around 22.

But if a U.S. CEO making more than 500 times what the average worker earns sounds like a wide gulf to you, it's nothing compared to what one sees in the airline business these days.

For example, United Airlines executive Glenn Tilton makes 1,000 times what a United flight attendant at the top of the scale earns. Tilton's total compensation in 2006 was estimated at $39 million. By contrast, United flight attendants earn an average salary of about $31,000.

No doubt, I will soon be hearing from this blog's NeoCon visitors, who will start lecturing me about how CEO pay is all part of the "free market." No doubt, they'll lecture me about how "liberals just don't understand capitalism."

Well, they're entitled to their viewpoints. But I wonder where these Republican-voting "capitalists" were in 2001, when the Republicans and the Bush White House bailed out the airline industry with $15 billion of taxpayer money (including a cash gift of $5 billion). If Bush supporters think this is "capitalism," they need to go back and re-read Adam Smith.


Anonymous said...

We agree for once. Well written. And no, I might be conservative on some points, but that doesn't make me a neo-con, and it doesn't mean I consider this to be a fundamental part of free market economics. It's a disgrace, and if unions got out of the bed they share with management, we might see some headway in workers' rights.


cwilcox said...

Tellin' it like it is Marc! Thanks man.
This book looks like a good read, "Since the 1970s, the conservative movement that took over the Republican Party has systematically set out … to dismantle all of the institutions created by Franklin D. Roosevelt and the New Deal to make this a more equal society," such as unions, progressive taxation and the minimum wage, Krugman says.

He also discusses the role race has played in influencing Americans to vote against their own economic self-interest, as well as how the shortcomings of the Clinton administration helped develop today's progressive political movement.

Anonymous said...


T. Rockett said...

Amen, CEO compensation in America is way out of control.
The whole CEO, CFO, VP reward situation at American is out of control. the workers are starving to death and qualify for food stamps yet you read in the Newspaper how we make 6 digit incomes. go throw bags, work on their junk airplanes or deal with the angry public, be a ticket agent. you won't even make close to a 6 digit income. it's a big joke! me (AMT - Aircraft Mechanic) and my Gate Agent wife made 80K together last year. feed a family, pay bills and try to exist in this expensive over taxed world on that. it's hard! with a 12Million dollar AMR Check like "Carpeys" or Brundages millions I'm sure they have to worry about a $380.00 electric bill or escalating grocery costs.


Marc McDonald said...

>>if unions got out of the bed
>>they share with management

I have no doubt that this is problem, but the real, major problem for American workers is that they are forbidden from joining unions.

Surveys show that 70 percent of non-union workers would join a union if they could. When asked why they don't join a union, the vast majority say that it's because they're fearful they'll be fired.

I saw this myself in the years I worked for the newspaper business.

Management was incredible hostile to unions and most of the workers I saw were timid and sheep-like and resigned to their fate.

I knew at least one union organizer who was murdered (the case, which occurred in 1983, was never solved, of course). In fact, after I saw that killing, I became much less willing to speak out in the workplace myself as I didn't want to become a statistic.

It is often said that in totalitarian regimes like those of Hitler and Stalin, the dictators' power depended on keeping the people in a state of fear.

I fail to see how things are different in our own society. People are scared shitless. Workers are afraid to organize. They're afraid to speak out. They live in constant state of fear that they'll lose their jobs (and then suffer the devastating loss of their health benefits). Workers in America are so shit-scared that fear has become the normal emotion of day-to-day life for most of us.

Marc McDonald said...

>>me (AMT - Aircraft Mechanic) and
>>my Gate Agent wife made 80K
>>together last year.

Yes, well if you think you have it tough, then at least spare a thought for the tens of millions of Americans who earn vastly less than you and your wife do. Median household income in this country is around $45,000---so you're earning $35,000 more than the median household.

Marc McDonald said...

Hi Red Hog, thanks for the kind words. Yes, I've heard of that Krugman book and plan to read it. Say, I read the article that you linked to in your post and I noticed this sentence:

>>Of course, the United States is
>>a much richer country than it
>>was 35 years ago

I would have to dispute that. 35 years ago, Americans had significant net household savings and the U.S. was the world's largest creditor nation. Back then, we also had a significant manufacturing base.
Today, we have a NEGATIVE household savings rate and America is the biggest debtor nation in the history of the world.
Most of our "prosperity" is a credit card mirage fueled by cheap imports from China and trillions of dollars in foreign capital, propping up our Ponzi scheme economy.
Our economy wasn't perfect 35 years ago, but no one seriously thought the the dollar was on the verge of meltdown. Today, that prospect not only seems possible, but it is probable.
So, I'd have to disagree with Krugman on that point...but he's a brilliant man and I plan to read his latest book.

Anonymous said...

While I'm not saying that in general your article is wrong. I want you to think about that 15B dollar bail out a second. 5B was split between the active air carriers. The remaining 10B was loans, of that 10B less than 3B was actually distributed and most of it has been paid back.

David said...

I do believe that if we gave in good faith they at lease give back what they took.We got families/I like this company but if i have to go on strike i will.I be happy if they will give us back what they took