Why American Airlines Is Stuck at the Gate

Through it all, AMR’s (AMR) American Airlines looked healthy enough to go it alone. Once the global leader, the Fort Worth-based carrier managed to avoid bankruptcy. Now, as other airlines recover, American is paying the price for sidestepping the near-death experiences of its competitors. It’s bleeding red ink. Its stock price has dropped 20 percent this year, the only decline among the six biggest U.S. carriers. And its pretax margin in the first half was -4.3 percent, the only negative among its peers. “They’re playing the hand they were dealt by avoiding bankruptcy,” says Stifel Nicolaus analyst Hunter Keay. “It’s unfortunately costing them dearly.”

Labor costs remain the big challenge. Of the almost 50,000 workers represented by unions at American, only a group of 90 technical specialists has approved a new contract. The carrier has been negotiating with its pilots for more than four years, while its flight attendants, airport ground workers, and mechanics have been in contract talks for more than two.

A continuing obstacle to labor agreements is the $1.6 billion in annual concessions the unions agreed to in 2003 to help keep the carrier from seeking bankruptcy protection. Filing for Chapter 11 protection would have allowed American to alter its labor accords unilaterally. Workers want the airline to restore at least some of the concessions. Management says that on labor costs alone, the carrier is still at a $600 million-a-year disadvantage to rivals. “It’s a big brick in our backpack to being competitive in this industry,” says Senior Vice-President Jeff Brundage.

The Transport Workers Union scrubbed a tentative accord for 10,600 baggage handlers and ramp workers in June. Mechanics and stock clerks rejected a three-year contract in August and authorized TWU leaders to call a walkout among their 12,700 members.

It’s much the same with flight crews. About 9,600 American pilots are working at 1993 hourly rates, leaving them with “massive anger and frustration” over a lack of progress in the talks, says David Bates, president of the Allied Pilots Assn. Adds Laura Glading, president of the Association of Professional Flight Attendants, which has 16,550 active-duty members at the carrier: “You can’t come to labor and keep taking and taking and taking.” Glading will meet with a federal mediator on Oct. 19 to press a union request that bargaining be declared at a stalemate, which could trigger a countdown toward a strike, the first at a big U.S. airline since 2005.

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Once the country’s largest carrier, American has been grounded by labor woes and high costs

By Mary Schlangenstein
http://www.businessweek.com/magazine/content/10_42/b4199019823300.htm

For much of the past decade, U.S. airlines have scrambled to remake themselves. United Airlines (UAUA), Delta Air Lines (DAL), US Airways Group (LCC), and Northwest Airlines all made trips through bankruptcy court and emerged with trimmer operating and labor costs. Then many carriers went into acquisition mode. Delta snapped up Northwest in 2008, United this month completed its takeover of Continental Airlines, and on Sept. 27 Southwest Airlines (LUV) said it will buy AirTran (AAI).

Through it all, AMR’s (AMR) American Airlines looked healthy enough to go it alone. Once the global leader, the Fort Worth-based carrier managed to avoid bankruptcy. Now, as other airlines recover, American is paying the price for sidestepping the near-death experiences of its competitors. It’s bleeding red ink. Its stock price has dropped 20 percent this year, the only decline among the six biggest U.S. carriers. And its pretax margin in the first half was -4.3 percent, the only negative among its peers. “They’re playing the hand they were dealt by avoiding bankruptcy,” says Stifel Nicolaus analyst Hunter Keay. “It’s unfortunately costing them dearly.”

Labor costs remain the big challenge. Of the almost 50,000 workers represented by unions at American, only a group of 90 technical specialists has approved a new contract. The carrier has been negotiating with its pilots for more than four years, while its flight attendants, airport ground workers, and mechanics have been in contract talks for more than two.

A continuing obstacle to labor agreements is the $1.6 billion in annual concessions the unions agreed to in 2003 to help keep the carrier from seeking bankruptcy protection. Filing for Chapter 11 protection would have allowed American to alter its labor accords unilaterally. Workers want the airline to restore at least some of the concessions. Management says that on labor costs alone, the carrier is still at a $600 million-a-year disadvantage to rivals. “It’s a big brick in our backpack to being competitive in this industry,” says Senior Vice-President Jeff Brundage. Leer más “Why American Airlines Is Stuck at the Gate”

More Wives Head for Work

The effect of this gender shift in the job market isn’t simply economic. Ellen Galinsky, president of the Families and Work Institute, has produced studies that show men now struggle to balance family and career more than women do—45 percent of men report such problems, vs. 39 percent of women. “Work isn’t working very well for men,” says Galinsky.

Angela Patterson, 44, knows the struggles all too well. When the single mother of two adult daughters met her husband three years ago, she was hoping to find economic security. Instead, he lost his job as a contractor, and Patterson ended up moving from North Carolina to New York to enroll at the Grace Institute, a nonprofit that prepares women for the workforce. The training helped her become an agent for New York Life. She’s living with her daughter in New York since her husband doesn’t want to come North. “Women are born and bred to be adaptable,” she says. “When you have kids and bills to pay, you make sacrifices.”

Few experts expect the women who were pushed by recession into the labor market to leave as the economy picks up. Eroded housing values, diminished retirement accounts, and the prospect of higher taxes and anemic wage growth for themselves and their husbands provide these reluctant workers powerful incentives to stay at their jobs.

Diana Gomez, for one, isn’t giving up her job in the dentist’s office, even though her husband was recalled to his job in a sheet metal factory four months ago. The double income they have now is enough to restore a minimal sense of security. “We can function as a whole family now,” says Gomez, who has two children. “We’re able to pay the bills. The pressure’s not all on me.”


By Diane Brady | http://www.businessweek.com

As men cope with unemployment, more wives head to work

Angela Patterson is working as an insurance agent in New York while her husband looks for construction jobs in North Carolina. Diana Gomez had been staying home to care for an ill daughter. When her husband lost his job, she became an administrative assistant in a dentist’s office. Michelle, a social worker and mother of three young children in Baltimore, who asked that her last name not be used, switched from part-time to full-time work when her husband was laid off last year. She kept to that schedule after he found work earlier this year—at two-thirds his former salary.

They are the reluctant breadwinners: Women who wanted to stay home until their income suddenly became critical to the well-being of their families. In some cases they are increasing their hours to keep the bills paid. Others are taking up employment for the first time as their husbands struggle to find work. With the anemic recovery keeping the job outlook uncertain, the accelerated gender shift is likely to stick, creating new challenges for U.S. families. Leer más “More Wives Head for Work”

Keeping Pabst Blue Ribbon Cool

On a July afternoon, Evan and Daren Metropoulos, the new owners of Pabst Brewing, showed up at the lounge on the 35th floor of the Mandarin Oriental in midtown Manhattan. They had come to discuss their plans for Pabst, which their father and co-owner, C. Dean Metropoulos, bought in May for about $250 million.

The Oriental does not serve Pabst Blue Ribbon, the company’s flagship brew, so the brothers ordered a lemonade and an iced tea. A hotel like the Mandarin may seem an unlikely meeting place for the owners of a beer that has long traded on its working-class image—the Lutz Tavern, a dive in Portland, Ore., is more like it, where 16-ounce tallboys go for $1.75. But the Metropoulos brothers were very much at home. They were passing through on their way to a wedding in Rhinebeck, N.Y., of an old friend from Martha’s Vineyard, Mass., where they have summered since they were boys. Evan, 29, divides his time between Miami Beach, Los Angeles, and New York City. Daren, 27, lives in Los Angeles, in Hugh Hefner’s old residence, a 7,300-square-foot English manor house he recently bought for $18 million.


For the jet-setting owners of the spontaneously hip beer, the hardest thing may be leaving the brand alone

By Matt Schwartz  |   //businessweek.com

https://i2.wp.com/images.businessweek.com/mz/10/39/370/1039_mz_62pabst.jpg

Jamie Chung

On a July afternoon, Evan and Daren Metropoulos, the new owners of Pabst Brewing, showed up at the lounge on the 35th floor of the Mandarin Oriental in midtown Manhattan. They had come to discuss their plans for Pabst, which their father and co-owner, C. Dean Metropoulos, bought in May for about $250 million.

The Oriental does not serve Pabst Blue Ribbon, the company’s flagship brew, so the brothers ordered a lemonade and an iced tea. A hotel like the Mandarin may seem an unlikely meeting place for the owners of a beer that has long traded on its working-class image—the Lutz Tavern, a dive in Portland, Ore., is more like it, where 16-ounce tallboys go for $1.75. But the Metropoulos brothers were very much at home. They were passing through on their way to a wedding in Rhinebeck, N.Y., of an old friend from Martha’s Vineyard, Mass., where they have summered since they were boys. Evan, 29, divides his time between Miami Beach, Los Angeles, and New York City. Daren, 27, lives in Los Angeles, in Hugh Hefner’s old residence, a 7,300-square-foot English manor house he recently bought for $18 million.

Evan, in a green polo shirt and gold necklace, has a generous build and gregarious manner. Ideas for the future of Pabst’s portfolio of brands spilled out of him in an entrepreneurial stream of consciousness. Daren, who occasionally interrupted, was in a navy blazer and button-down shirt. He is narrower, quieter, and cleaner shaven than his effusive brother.

Evan had been thinking about Red White & Blue beer, one of the company’s roughly two dozen defunct brands, which they hope to revive. “What if we made that the military beer?” asked Evan. “What if we gave a huge portion of the proceeds to military charities—a grassroots program with military families? Why shouldn’t Red White & Blue be the absolute American beer for the American soldier? We’ll bring, you know, the Rotary Club, the veterans.”

“To help collaborate and get involved,” added Daren.

“To support our troops,” Evan continued. “We could develop a whole beer brand around our troops. So that when you see Red White & Blue at your barbecue, you know that money’s supporting people who have died for our country. Those are ways that Budweiser will never be able to relate to. They’re not American, like us.”

“This is an American company serving the American people,” noted Daren.

Evan began to get worked up, saying: “If you knew that 25 percent of your proceeds from Red White & Blue Beer were going to support these charities, then shame on you for drinking Bud Light! What the hell are you drinking that for? To support some foreigners?” Leer más “Keeping Pabst Blue Ribbon Cool”

Chrysler Aims for February Deadline to Open U.S. Fiat Showrooms

Sergio Marchionne, chief executive officer of both Chrysler and Fiat, has said the Fiat 500 will go on sale late this year in the U.S. as the Turin, Italy-based automaker reintroduces its namesake brand to the world’s second-largest auto market. Fiat, which owns 20 percent of Chrysler, took control of the U.S. automaker as part of its bankruptcy restructuring in 2009.

The company said it will pick new Fiat franchises based on several criteria, including plans to create a standalone facility. Dealers have been told to build a business case for a Fiat franchise based on gross margins of as much as $1,500 for each Fiat 500 sold, people familiar with the planning have said.

Free Space

Some Chrysler dealers will have open space for a Fiat franchise after the closing of General Motors Co.’s Saturn and other brands, said Alan Helfman, vice president of River Oaks Chrysler Jeep Dodge in Houston. Helfman said in a telephone interview that he’s planning to submit a franchise application.

“I can have preparations in place, but I think it’s going to take a little time” for a showroom, he said. “Anytime I’ve built anything, if I thought I could do it in three months, it took six.”

Marchionne is scheduled to attend his first large-scale meeting with Chrysler dealers today in Orlando, Florida. The meeting, the first since 2007, comes as Marchionne is introducing 16 new or refreshed vehicles before the end of the year.

2011 Lineup

The heads of the automaker’s vehicle brands — Chrysler, Dodge, Jeep, Ram and Fiat — are also expected to attend the meeting, Kisiel said. For most dealers, it will be their first chance to see the 2011 model year lineup, much of which will reach showrooms later this year, he said.


Whitehouse Chrysler Group

By Tim Higgins

Sept. 14 (Bloomberg) — Chrysler Group LLC, the automaker run by Fiat SpA, said dealers who want to sell the Fiat 500 subcompact car in the U.S. should have their new showrooms completed and running by the end of February.

Dealers will need time to train staff for selling the Fiat 500 and should have a separate showroom in place prior to the start of marketing in March, Ralph Kisiel, a Chrysler spokesman, said yesterday.

“We’d like it up as soon as possible so they can get their Fiat franchise and start selling the vehicle,” he said in a telephone interview.

Dealers must submit their Fiat franchise proposals to Chrysler by Sept. 22, and about 165 winners will be picked in October, the Auburn Hills, Michigan-based company has said.

Some dealers may be allowed to open later, Kisiel said.

“The key here is you don’t open something if they’re not ready,” Kisiel said. Leer más “Chrysler Aims for February Deadline to Open U.S. Fiat Showrooms”

Innovation: Enough with the Freedom to Fail

There’s no doubt that innovation entails risk and randomness, and that sometimes people are going to do all the right things but get bad results. We should celebrate people who take well-thought-out, calculated risks that don’t pan out. That is not failure but important learning on the road to organizational success, as resources can be redirected to projects with higher potential.

But that doesn’t excuse stupidity and sloppiness.

The best innovators approach uncertain problems thoughtfully. They seek to learn as much as possible from whatever data they can get their hands on. They use that information to design and execute well-constructed experiments around the most critical unknowns in their plans. Learning from those experiments informs their next steps.


Let’s not go overboard with the freedom to fail. Companies should let employees know they expect success more often than not. Pro or con?

Pro: Excuses, Excuses

by Scott D. Anthony, Innosight

I’ve seen it happen all too frequently. A manager opens up a review meeting about a project that is clearly struggling by saying, “Remember, we’re innovating here. We should expect to fail.”

Too frequently, that’s code for something far more ominous. Give the manager truth serum, and you would hear, “I screwed up” or “I didn’t do my homework.”

There’s no doubt that innovation entails risk and randomness, and that sometimes people are going to do all the right things but get bad results. We should celebrate people who take well-thought-out, calculated risks that don’t pan out. That is not failure but important learning on the road to organizational success, as resources can be redirected to projects with higher potential.

But that doesn’t excuse stupidity and sloppiness.

The best innovators approach uncertain problems thoughtfully. They seek to learn as much as possible from whatever data they can get their hands on. They use that information to design and execute well-constructed experiments around the most critical unknowns in their plans. Learning from those experiments informs their next steps. Leer más “Innovation: Enough with the Freedom to Fail”

The Big Trend in Small Social Sites

Apple (AAPL) dove into interest-specific social media this month with the launch of Ping, a service for connecting music fans and artists. Unlike Ping, which has a ready-made feeder community of tens of millions of iTunes customers (and which surpassed 1 million users in just 48 hours), most niche network operators have to do more with less, building features into their sites to secure loyalty and interaction from users. There’s a payoff: They can charge higher ad rates. “The only way for a network to survive in a small community is to have a very high revenue per user,” says Jeff Clavier, a Silicon Valley angel investor who has backed canine site Dogster and video-gamer community Curse.

The exemplar of niche network success is myYearbook, founded in 2005 by siblings David and Catherine Cook. The site pulls in 25 million users, mostly teenagers, via dozens of games such as Blind Date, in which players attempt to match up compatible peers. “Our assumption is essentially everyone will have a Facebook account and use it to connect to friends and family,” says Geoff Cook, who joined his brother and sister soon after they founded the New Hope (Pa.) company, becoming chief executive officer. “Our users are here to meet new people.”


Niche social networks such as myYearbook and Dogster draw users and advertisers, adding up to a sizable portion of the social Web

By Douglas MacMillan
Saltwater fly-fishing pro Tony Biski recently came home with a story so good he couldn’t wait to share it. “It was a 12-foot great white shark viciously thrashing his tail and spraying us as he ran off with the fish,” wrote Biski, a resident of Chatham, Mass., in a post that grabbed the attention of dozens of other anglers on the Web. One commenter wanted to know if Biski had time to snap a photo. Another quipped: “Just in time for the 35th anniversary of Jaws.”

Biski didn’t bother posting his fish tale on Facebook, the 500 million-user site that’s the world’s biggest social network. Instead, he shared his story on GoFISHn, a community of a few thousand anglers. The site features maps that pinpoint where fish are biting, a photo gallery where members can show off their catches, and other quirks that distinguish it from a mass audience site. “We feel like we’re a moon orbiting Facebook,” says Ned Desmond, a former digital publishing executive at Time Inc. (TWX) who launched GoFISHn in December 2009. Desmond plans to create GoHUNTn and up to eight other interest-specific networks in coming years.

Facebook’s six-year rise from exclusive online hub for Ivy Leaguers to global digital directory has inspired a countertrend: niche social sites. Name an affinity, hobby, occupation, or demographic—mustache-wearing men, hamster lovers, moms, research scientists, boomers—and there’s likely to be a dedicated social network for it. While most niche networks are run by fledgling tech startups and are, almost by definition, small, they add up to a sizable portion of the social Web; in July at least 280 million people logged on to social sites other than Facebook and Twitter, according to audience tracker comScore (SCOR). Andrew Lipsman, comScore director of industry analysis, estimates the real number could be as high as 700 million, since many people use more than one social site. Leer más “The Big Trend in Small Social Sites”

The Challenges Facing Burger King Buyer 3G Capital

Burger King has had a turbulent history. Under Diageo, a former chain executive says, it was largely left alone and milked for cash, with the unit treated as an outpost for leaders in training. Once it moved into private equity’s hands, the focus switched to differentiating the brand from McDonald’s, with a focus on young men, for whom high-calorie burgers and ads with dancing chickens or a creepy-looking king seemed cool. The investors also focused quickly on returns: They initially kicked in $325 million of their own money, collecting more than that in special dividends. With added fees, funds from the initial public offering, and proceeds from the current sale, Burger King has been an investment winner even as its sales lagged behind rivals.


A Burger King restaurant in Leicester Square, ...

The investment outfit and its Brazilian backers will need to do more than just cut costs at the troubled burger chain

By Diane Brady
When it comes to the pitfalls of operating a fast-food chain, Burger King (BKC) has experienced them all: falling profits and sales, angry franchise owners, mediocre innovation, growing competition, and a razorlike focus on the very customers who have been hardest hit during the recession. So when a little-known investment outfit called 3G Capital said it would buy the Miami-based chain for about $4 billion on Sept. 2, an obvious question was: why?

Burger King may be the world’s No. 2 hamburger chain, but it’s a distant runner-up, with 12,174 restaurants worldwide vs. 32,466 for McDonald’s (MCD). McDonald’s averages about twice the sales volume per U.S. outlet, and its stock has far outperformed that of its rival on the strength of new products such as coffee drinks and smoothies. Burger King, in contrast, has seemed fixated on hawking a $1 double cheeseburger—now $1.29 following a bitter lawsuit with franchisees who claim it’s a money loser. The chain has also narrowed its target audience, chasing young men with cheeky ads, while McDonald’s has gone for broad family appeal. Leer más “The Challenges Facing Burger King Buyer 3G Capital”