American Airlines Group Inc. recently came to an agreement to settle the blazing issue with it’s workers by declaring profit sharing. American Airlines Group Inc. is not the only U.S. carrier to take such step. Other major carriers like United Continental Holdings, Delta Air Lines Inc. and Southwest Airlines Co. also share their profits with employees.
American Airlines Group Inc. has declared that it would give 5% of pretax income to its profit sharing fund. This excludes the one-time items. The first implementation of this new scheme will be seen in early 2017. The Chief Executive Officer Doug Parker of American Airlines Group Inc. was not quite happy about this decision. He wanted to pay higher base rates instead of the profit sharing scheme. He believed that profit depended on the demand of travel, and so, this kind of variable amount must not be included in the employee’s compensation scheme.
The employees were told that this profit sharing scheme was included in their compensation plan in order to emphasize the company’s emphasis on working as a team. The company also believed that this new scheme would improve the labor relations and thus it will have a positive impact on the Airline’s performance. The company was also looking towards changing the culture of the company and this is a good step to do so. The company also announced a 6% increase in the salary of flight attendants starting from April 1, depending on the approval from the union.
The CEO of the company hopes that these changes in salary and compensation will make the employees feel that they are extremely valuable for the company. Though 5% profit sharing is lower than that of the other carriers; for example, Delta offers 10% pretax earnings to it’s profit sharing funds. But this lower amount of profit sharing by American Airlines will be compensated for by the higher pay rates that are promised in the contracts. So, overall the total labor spending will be equal to the other carriers.
You will be surprised to know that Delta paid $1.5 billion in profit sharing for last year. This is the largest amount paid ever for such kind of program. Southwest provided 15% of pretax income which equaled $620 million and United paid $698 million. These were the highest amounts paid by both the companies.
Though these figures seem intriguing, American and the union have agreed to stick to the 5% profit sharing and increased base rates instead of a higher rate of profit sharing.