Ahead of its recent first quarter earnings call, American Airlines announced pay increases for pilots and flight attendants totaling $350 million annually. The announcement came more than two years ahead of labor contract renegotiations. Employees were likely as delighted for more money in their paychecks as shareholders were disappointed to see the bottom line decrease by that same amount. Traders reacted with displeasure and sent the stock down more than 5 percent. A Citi analyst lamented, “Labor is being paid first…again. Shareholders get leftovers.”
Unfortunately, such remarks—while jarring—are not unusual. A “shareholder before and above all” mentality has become commonplace on both sides of the market, and it’s damaging future economic growth. The consolidated airline industry is a strong example of how short-termism—where focus on quarterly profits often comes at the expense of future performance—has become a business norm.This article was originally published in Morning Consult.