Wall Street isn't buying American Airlines' (AAL) - Get Report $1 billion pay increase for flight attendants and pilots.

American shares fell Thursday by almost 7% to $43.16.

The carrier said late Wednesday it will jump ahead of contract negotiations scheduled for 2019 and 2020, respectively, for flight attendants and pilots, and will award flight attendants a 5% raise and pilots an 8% raise.

The cost of the early raises, American said, would be $230 million in 2017 and $350 million annually in 2018 and 2019.

The first three analyst questions on American's earnings call concerned the pay increases.

First off, Citi analyst Kevin Crissey asked whether American saw any evidence that "cultural investments are more than recouped by higher revenue."

Crissey said he had worked at JetBlue (as director of investor relations) and indicated he had not seen investor support for an approach that is viewed as consumer-friendly.

American CEO Doug Parker said, as he did repeatedly both before and afterward, that revenue and financial performance correlates with employee morale.

"Pay levels higher than others allow us to generate higher revenues," Parker said, noting that American is seeking to close its revenue gap with competitors. "Doing that while asking the team to work for less is difficult," he said.

American signed five-year contracts with flight attendants and pilots soon after the 2013 merger with US Airways. Afterward, Delta and United signed contracts with higher pay. "It got to where the gap was too big and was going to be in place for too long," Parker said.

In that scenario, Crissey said, labor rates keep rising. "'Labor rates go to the dumbest management team out there' is an argument investors can look at," he said.

"I would beg to differ," Parker responded. "We're not leading this charge; we're just making sure we catch up."

Two other analysts also questioned the rationale for pay increases.

One of them, JPMorgan analyst Jamie Baker, cut his rating on American to neutral from overweight.

"We are troubled by AAL's wealth transfer of nearly $1 billion to its labor groups," Baker said in a note. "In addition to raising fixed costs, American's agreement with its labor stakeholders establishes a worrying precedent, in our view, both for American and the industry.

"Remember this day," he said. "This is a seminal event, and represents the first, credible potential blow to our long-held 'it's different this time' investment thesis.

After the call, CFRA analyst Jim Corridore cut his target price to $52 from $60 but kept a buy on the shares. Corridore also cut his 2017 and 2018 earnings estimates to $4.40 from $4.71 and to $5 from $5.34 respectively.

The cuts reflect the "impact of American's offer to raise pay for pilots and flight attendants," Corridore wrote. "We see this offset partly by improving revenue environment. We remain positive due to strong profitability and cash generation and good unit revenue trends."

Before the call, Cowen & Co. analyst Helane Becker issued a titled "Proposed employee pay increases to overshadow any positives."

She certainly appears to have been right.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.