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Workers at all levels are under scrutiny at American Airlines

There's tension in every corner of American Airlines these days. That's expected when a company files for bankruptcy and plans to lay off 20 percent of its workers.

But among the 9,000 workers in management and support, including those at the headquarters on Amon Carter Boulevard, there's reason for higher anxiety: Everybody, literally everybody, is on the bubble.

Every job, person and department is under the microscope. And the scrutiny has intensified since mid-February, when American hired experts to help evaluate which people are needed most and where they fit in a new corporate hierarchy.

American is paying a small fortune for this input, up to $11.7 million over seven months to the Boston Consulting Group. At that price, every measurable and intangible factor will be considered, and a major shake-up is inevitable.

American's former CEO and three senior executives are already gone, their duties absorbed by up-and-coming leaders shortly after the Chapter 11 filing in November. That winnowing process will cascade down through the ranks as American cuts an estimated 1,400 workers in management and support.

In one sense, this downsizing will end similarly in every work group at American. Bankruptcy law requires that each group be treated fairly and equitably, and American has proposed comparable cost savings across the board. But the effect on individual workers isn't close to the same.

Even before American filed for Chapter 11, attention had focused on reducing the union footprint, because labor costs are the biggest piece of the reorganization puzzle. But at the end of the day, most veteran flight attendants, mechanics and union workers will hold on to their jobs, and almost all the pilots will keep flying if they wish.

They'll work longer, pay more for health insurance and take a serious hit on retirement benefits. But their jobs are protected by seniority and contracts that dictate how furloughs are handled. More than 10,000 union workers may be laid off eventually, but at least they know who's most vulnerable -- and that the process must follow a long-established order.

On the management side, it's a free-for-all. There's no telling who will stick. It's like auditioning all over again, no matter how long you've been bringing it.

"The redesign starts at the top and will encompass the entire management and support staff team," CEO Tom Horton wrote to employees in late January, foreshadowing American's streamlining.

One month later, the vice president of global sales sent a letter to his unit that outlined some changes: New roles will require different skills. New measuring sticks will collect different data points. Tests will cover specific knowledge and behavior, with the scores to be included in historical performance. And top jobs will require an interview.

"For many of you, this will be a welcome, exciting change," Derek DeCross wrote.

"For some, the new sales organization may no longer be a good fit," he wrote a few paragraphs later.

Some may find another role at American, while others will exit the company, he said, adding that change is never easy.

"Rest assured that each of you, regardless of the outcome, will be treated with dignity and respect," he wrote.

Chilling words, even if workers can rationalize that the vast majority will remain with the company. At the least, the letter signals how much upheaval is ahead. Does anyone who saw that letter expect sales commissions to go up?

Ultimately, American executives will make the call on department heads, organizational structure and specific layoffs. But the outsiders' influence will be substantial if it's commensurate with the costs.

Boston Consulting analysts are charging a blended rate of $580 an hour, which translates to $29,000 per week per consultant, according to American's proposal to the bankruptcy court.

Eight to 14 consultants will work on the so-called Cascade Project for about 32 weeks, the filing said. The first two months focus on diagnostic and planning work, followed by four to five weeks to develop each management layer and broaden the span of control. In theory, realigning departments will produce better results, not just lower costs -- even with fewer workers.

"Obviously, American Airlines' management hasn't made the best decisions, so it makes sense to bring in outsiders to evaluate everything," said Ramesh Rao, a finance professor at the University of Texas at Austin and an expert in corporate restructuring.

American needs new ideas, Rao said, which is why the company also hired experts in finance, legal strategies, business planning, labor relations and aircraft restructuring.

In reinventing the management group, execs have the leeway to make sweeping changes that they can't replicate with the unions.

"On the management side, it's not seniority that counts," Rao said. "It's who creates the most value."

That can be a cold calculation, but it comes with the career track. Recall the controversies that erupted every (rare) time that American management banked a stock award in the past decade. Union workers bristled at the inequity of it all, even though management ultimately netted little variable pay, as befitting a failing company.

The management and support staff includes many white-collar workers who didn't get bonuses and don't get the protections hammered out by American's union workers, either. Many have the flexibility to switch companies, even industries, as long as the economy is growing. Most pilots and flight attendants don't have that option, because they couldn't rack up enough seniority to make up the lost ground.

"Management is a higher-risk, higher-reward proposition," said Dan Short, an accounting professor at Texas Christian University. "You always read about the rewards and bonuses, but the risk is that your job is never guaranteed. At age 55, you can be out of work."

That's true for most workers, not just CEOs. American Airlines will generate a lot of pain in coming months, and it will reach far and deep.

Mitchell Schnurman's column appears Sundays and Thursdays. 817-390-7821

Twitter: @mitchschnurman

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