In our ongoing analysis of American Airlines’ labor costs, competitive strengths and competitive disadvantages in the industry, our comparisons include only our direct competitors: the other network carriers, “low-cost carriers,” and other specialty airlines that compete for business and leisure travelers.
We do not include shipping companies like UPS and FedEx in gauging our labor costs and competitive standing in the passenger airline industry. From the standpoint of a competitive analysis, there is no direct comparison between two vastly different industries.
Shipping companies operate on an entirely different business model – one geared not to meet the varied demands of the traveling public, but instead to getting boxes and envelopes from one address to another.
- Fewer cargo carriers in the market means less competition and the ability for those companies to pass high fuel costs, landing fees and other related costs onto the consumer. In the fiercely competitive passenger airline industry, passenger airlines have little power to set prices to reflect these costs.
- Shipping companies generate higher revenues and profits per aircraft. The shipping industry charges by weight, not “passenger.”
- Shipping companies are not bound to the same DOT measurements, nor do they typically compete for gate space at airports, making for a more efficient ground operation.
- On average FedEx and UPS generate nearly double the revenue on a per pilot basis. Different contracts and work rules in the shipping industry mean that those companies can employ fewer pilots to fly their fleets.
- Approximately 94 percent of FedEx’s annual revenue is generated by its cargo business. And a substantial amount of that is handled by its ground operations. According to company SEC filings, of the nearly 6.7 million packages FedEx processes each day, nearly half (3.2 million) are handled by its ground operations.
- FedEx's 4700 pilots make up less than two percent of the company's overall workforce and operate 670 aircraft. By contrast, American's 8,449 active pilots make up about ten percent of AMR’s total workforce and operate 663 planes.
- In comparison to FedEx’s 670 aircraft, the company utilizes 75,000 vehicles to deliver packages to its customers.
While American does have an interest in the cargo business, our cargo operation accounts for less than 4 percent of annual revenues and does not significantly drive our operational decisions or cost structure. Therefore, there is no relevant comparator between the passenger airlines and shipping companies in terms of labor costs.
