American Airlines Just Made an Announcement No Company Wants to Make. Here’s What You Can Learn From It

American Airlines announced this week it is canceling about 950 flights between now and mid-July. That amounts to about 1 percent of its total flights, the airline told Inc. More cancellations may be coming as American continues to evaluate its options. The company says it deliberately chose airports where there are many alternatives for getting passengers to their destinations. It says it will notify passengers well in advance, but if you have a flight booked on American in the next few weeks, it might be wise to check that it’s still scheduled to fly.

Why are so many flights being canceled when planes are full and passengers are eager to fly? Because the airline doesn’t have enough people to fly them. American, like other airlines, spent much of the past year reducing its workforce, encouraging people to take early retirement for example. In October, the airline announced it was suspending service to 15 destinations and reportedly furloughed 19,000 employees, including 1,600 pilots. That furlough may have been short-lived. American spokesperson Sarah Jantz told Inc. in an email that all 1,600 pilots were called back in December, in accordance with the extension of the Payroll Support Program, and that they’ve been returning to work “based on operational need.” 

At the time of the furloughs, Captain Dennis Tajer, an American pilot who heads communications for the Airline Pilots Association, warned that it might take 15 months for furloughed pilots to be able to fly again, due to FAA retraining requirements for pilots who haven’t flown in a while. That warning seems to be coming true. “They’re in the middle of retraining pilots who might have been idled during the pandemic,” said CNBC reporter Leslie Josephs when asked to explain the crew shortage.

American Airlines spokesperson Sarah Jantz says severe weather has made things much worse. “On several days throughout the past weeks, we’ve experienced multi-hour ground stops that have had a serious impact not only on our aircraft routing, but also our crew routing,” she told Inc. by email. “Major weather, like what we’ve seen in DFW [Dallas] and CLT [Charlotte, North Carolina], can have lasting impact on our crews as many exceed their eligible work time or need to be rerouted based on flight changes. While we have reserves, bad weather can quickly cause us to exhaust these additional crew resources.”

With or without bad weather, taking a large portion of your product off the market just as demand for it is spiking is the last thing any company wants to do, especially in a highly competitive industry such as air travel. American isn’t the only airline that’s had to cancel flights during times of high demand. Delta canceled flights over Thanksgiving because of a pilot shortage, CNBC reported. And Southwest Airlines suffered three days of embarrassing delays and cancellations due to a series of technical glitches.

But canceling almost 1,000 flights weeks ahead of time because you know you’ll be short of staff is a highly unusual move that reveals just how bad American’s staffing trouble are. What went wrong? And what can business leaders learn from them?

1. Don’t take on debt just because you can.

A year or so before the pandemic, American ran up some debt to finance a stock repurchase and to modernize its fleet. The Wall Street Journal reported at the time that U.S. businesses had pushed corporate debt to record levels, apparently seeking to take advantage of low interest rates and a booming economy.

Increasing debt probably seemed like a good idea at the time. But when all large U.S. carriers were forced to borrow during the pandemic, American wound up with more debt than its peers–a total of about $50 billion. That extra debt may have meant the airline was particularly eager to cut costs by reducing its work force when it could.

2. Don’t sell what you can’t deliver.

High debt may also explain why American was quicker than some other airlines to offer more flights as air travel demand rapidly grew in recent weeks. “They have packed their scheduled a little but fuller than some of their closest competitors like Delta and United,” Josephs said. “And what they’re finding is there is a shortage of workers.”

3. Don’t take for granted that employees will be available.

Weather may cause flight delays, cancellations, and even employee routing problems in the short term. But the fact that American is canceling this many flight three weeks into the future suggests the airline has staffing problems that go beyond weather. Tajer told the Daily Mail that some of the furloughed pilots took other jobs, flying for delivery services for instance, and won’t be returning to American anytime soon. If that’s true, and if the same applies to other furloughed crew members, that would explain why American seems to have fewer people available to work its flights than it expected when it created its new schedule.

That’s an important lesson for every business leader these days. Your company may be a great place to work, but employees have more choices than ever, especially those with hard-to-acquire skills such as flying or maintaining an airplane. The time is past when you could send people home and expect to bring them back whenever you were ready. Companies in all industries are so fond of saying that their “greatest asset is our people,” that it’s become a badly overused phrase. In today’s tight labor market, many are learning the hard way just how true it is.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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