American's Pilot Mix-Up Could Cost the Carrier $10 Million
When it was first announced, American Airlines' pilot shortage caused a headache for both the airline and its passengers. While the, uh, nightmAAre before Christmas has since been resolved, and AA says all of its holiday flights will be fully staffed with pilots, the mix-up could come with a hefty price tag for the airline. JPMorgan Chase analyst Jamie Baker estimated on Monday that the scheduling mix-up could cost AA about $10 million.
Last week, American Airlines made headlines when news surfaced that more than 15,000 of its holiday flights between December 17 and 31 had an insufficient number of crew scheduled to operate them. To avoid a true mess, the carrier offered to pay pilots 150% of their hourly rate in order to get the proper staffing for the flights. The plan worked, and late last week, the carrier and the Allied Pilots Association said that the situation had been solved after American reached a deal to pay pilots double their wages.
According to the Associated Press, Baker said in his analysis that the settlement that AA reached with its pilots will deflect the potential bad publicity for potentially cancelled flights. Baker also said that AA's fourth-quarter earnings per share could rise, based on strong ticket demand, even with the additional cost of keeping the pilots on the planes.
Other analysts agree with Baker that the issue will not affect the airline seriously. For a major corporation like American with a revenue of $11 billion a quarter, $10 million isn't that much money, especially given the bad publicity that could have ensued had the issue gone unresolved. Nevertheless, it's interesting to see what kind of money AA is forking over in order to keep enough of its pilots in operation during the busy holiday travel season.