AA and US merger?
- Thread starter LUVJAMESC4EVER
- Start date
jimntx
Veteran
If $3.50-$4.00/gal gas does not cause people to give up their gas-guzzling Suburbans and F-250 pickups (not one in ten of them need a vehicle that large), why ever would you think that they would agree with the concept that $3.15/gal jet fuel requires more revenue than $0.50/gal jet fuel? Silly boy.
I disagree. I think Horton and Co. are smart enough to lower costs and avoid the merger drama. If a competitor needs to be taken out let someone else do it. AA will have plenty on its plate with out the forever infighting "u".
missing link
Newbie
- Jan 20, 2008
- 12
- 10
I work for US Airways and I understand why AA employees don't want to merge with us.
US Airways has become the most undesirable airline in terms of labor and general operations, in the industry.
Delta and United did not want us, and trust me, nobody else does either.
The reason is very clear to me.
After the second bankruptcy filing, the new management destroyed what good remained of US Airways, namely labor relations, clean and reliable airplanes, and customer service.
The withdrawal of the videos on long-haul flights, the removal of the closets on first class, the especially the ridiculous act of charging for sodas, coffee and water, (as they believed it would be followed by all other airlines,) showed how stingy, and shortsighted, are our "leaders."
Who would like to have those guys running the company that they work for?
Who would want to merge with a company that has become synonymous with shabby service and planes, and unhappy employees.
Sorry my fellow colleagues but I don't think that the AA employees are being arrorgant, they just don't want to become a third-class airline like US Airways.
As to the controversy regarding the arguments and discussions about what will happen, I think everything is uncertain and anything can happen, even the merger between the companies.
However if the childish nonsense of accusations continues, and the merger does happen, it will lay a foundation for a very bad relationship between us, the
employees.
That is a burden that could be avoided if we all act as adults.
Good luck to all of us.
US Airways has become the most undesirable airline in terms of labor and general operations, in the industry.
Delta and United did not want us, and trust me, nobody else does either.
The reason is very clear to me.
After the second bankruptcy filing, the new management destroyed what good remained of US Airways, namely labor relations, clean and reliable airplanes, and customer service.
The withdrawal of the videos on long-haul flights, the removal of the closets on first class, the especially the ridiculous act of charging for sodas, coffee and water, (as they believed it would be followed by all other airlines,) showed how stingy, and shortsighted, are our "leaders."
Who would like to have those guys running the company that they work for?
Who would want to merge with a company that has become synonymous with shabby service and planes, and unhappy employees.
Sorry my fellow colleagues but I don't think that the AA employees are being arrorgant, they just don't want to become a third-class airline like US Airways.
As to the controversy regarding the arguments and discussions about what will happen, I think everything is uncertain and anything can happen, even the merger between the companies.
However if the childish nonsense of accusations continues, and the merger does happen, it will lay a foundation for a very bad relationship between us, the
employees.
That is a burden that could be avoided if we all act as adults.
Good luck to all of us.
I'm not a bankruptcy attorney or even a bankruptcy know-it-all but I do know enough to be dangerous - and that's why I don't practice bankruptcy law. But even mortgaged planes can be dumped if AA doesn't want to fly them - AA could surrender the planes and allow them to be repossessed. Could be, however, that the secured lenders don't really want all those used planes and would be willing to take a haircut on their secured debt. Don't know how much cross-collateralization is present and whether AA could use the "cram-down" provisions of bankruptcy to reduce the secured debt to the market value of the collateral (which is likely a small fraction of the principal in some cases). As you probably know, the excess becomes unsecured debt and thus can share in the dividends to the unsecured creditors which will likely include a portion of the new stock.
WorldTraveler
Corn Field
- Dec 5, 2003
- 21,709
- 10,662
- Banned
- #261
Companies have to do valuations of assets that are used to secure debt... AMR was supposed to begin that process right now if they had not filed for BK. It is possible that AMR filed now because they knew that many of their assets had devalued to levels that didn't support the debt but if the valuation process had been done, then secured debt remains at a higher position in the pecking order than unsecured debt... I don't know how the process works but it could get very messy if AMR was attempting to inflate the values of its assets in order to support more debt....
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Also, to the comment by Damaj..., the creditors committee does not vote on mergers or decide corporate strategy. The job of the creditor's committee is to attempt to agree on how they can each best recover their claims.
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It is far from clear that the government could succeed at attempts to regulate the unbundling of fares... that is an economic aspect and the industry was deregulated. I don't like getting nickled and dimed to death by fees on cell phone service, utilities etc but they are regulated (some of them) and are allowed to have add ons... further, if you look at the number of tax items that are part of a ticket, a very strong case could be made that the government itself has added so many fees and taxes that TAXES are the real problem, not airline imposed fees.
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Keep in mind, though, that the biggest benefit to the industry of fees is that they are not directly taxed like base air transportation is - and that is why the government does not like it. They tax the base rate of the ticket but there are no taxes on top of fees... that in part is why the airlines like to use them and the government hates them.
I don't know how it will all turn out but it could be a very hard battle for the government to attempt to eliminate them... they could however tax fees and that removes alot of incentive for the airlines to use them.
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I'm not talking about inflating the value of anything. I'm simply disputing the assertion that owned aircraft (subject to encumbrances) present insurmountable obstacles to reorganization. Secured debt incurred in 2001-03 (when AA borrowed against plenty of planes to raise cash) no doubt had plenty of cushion (nowhere near 100% LTV) but the value of those 757s and 763s has no doubt declined substantially in the past decade. And any debt secured by MD-80s is, for practical purposes, unsecured debt at this point. Thanks to the bankruptcy code, AA could surrender those MD-80s and then rid itself of the debt. Secured debt is better for creditors than unsecured debt unless the collateral has diminished to near-worthless status. And I don't think anyone can argue with a straight face that MD-80s have much more than scrap value in today's market.
None of this has anything to do with the relatively valuable airplanes like the 738s or the 777s. But if I were a bondholder of bonds backed by MD-80s or the oldest 757s or the first 763s to be delivered, I wouldn't be counting on getting much besides some stock in the reorganized AMR.
USCREW
Veteran
American Airlines charts a course through bankruptcy
http://www.centreforaviation.com/analysis/american-airlines-charts-a-course-through-bankruptcy-63987
http://www.centreforaviation.com/analysis/american-airlines-charts-a-course-through-bankruptcy-63987
signals
Veteran
They've been doing it since their last merger failed. What's really funny is that they can't stand each other with that whole West vs. East thing they got going. All US will bring to the table is misery.
In US terms it's Kettle meet Pot
jimntx
Veteran
No, another "consultancy" which makes a living off of advising others about the airline business publishes its guess of what American's course through bankruptcy will be. They have no more idea than you or I.
WorldTraveler
Corn Field
- Dec 5, 2003
- 21,709
- 10,662
- Banned
- #266
First, there are estimations of what aircraft are worth at points in time in the future... and the intention is for debt to not exceed the value of the collateral. 2nd, there is a process or revaluation of assets that is required in order to ensure that the value promised is the same as what the underlying collateral can support.
The chances that previously secured debt will now be significantly unsecured is very slim.
Remember that some of the M80s and 757s are less than 15 years old, plenty young enough to have value that can be used as collateral for a loan.
That said, I don't disagree that it is possible to walk away from secured debt but it is a much harder process and unsecured creditors will fair very poorly if AA starts dumping secured assets because secured creditors go ahead of unsecured creditors. Labor particularly will not fare well if AMR decides to start dumping secured debt.
The 777 fleet is entirely owned. About half of the 738s are leased but chances are they cannot be renegotiated much because the value of the 738 is still very strong.
It is simply not possible for AA to walk away from huge numbers of its fleet in BK because they won't start receiving replacements until after they are planned to exit BK.
They will be able to renegotiate leases to much lower rates and presumably also sign short term leases since those aircraft should not be in great demand by anyone else.
Nice gesture. Really, I mean that.
Given the reality of LCC's situation and viability going forward, I would much prefer the go it alone route. I feel that LCC would be not adding value to the AA brand or network that LCC employees seem to think. I also understand why you'd like to see it happen. We don't have that same need. In reality, I had the same concerns for our future that you have... But that changed with the BK.
DP had been peddling LCC for as long as anyone can remember, and its obvious U need us more than we need you.
Sorry, nothing personal.
Even if the collateral consists of MD-80s? It appears that you may be trying to argue with a straight face that MD-80s have non-negligible current market value. If so, I disagree.
I may be mistaken, but I believe that the youngest nAAtive MD-80 is at least 22 years old and, unless I'm mistaken, every ex-TWA MD-80 (of which some are indeed among the youngest MD-80s in existence) is leased; none of the ex-TWA MD-80s is owned. Accordingly, if it's secured debt and it's secured by MD-80s, they're getting long in the tooth. And I doubt have any significant value above scrap. Yes, AA has some relatively newer 757s and 763s and those are still valuable. But MD-80s? Not so much.
I'm not sure I follow. Are you saying that the unsecured portion of secured debt following a cram-down is entitled to a higher priority than other unsecured creditors? If so, I didn't know that.
Yes, I realize that the 777s are owned and that's why I said "None of this has anything to do with the relatively valuable airplanes like the 738s or the 777s." And I agree with the truism that the 738s don't represent much potential lease-rate savings opportunities.
For all we know, AA may be able to walk away from every MD-80, owned or leased, and sign those low-cost and short-term leases until the replacements are delivered. And it won't matter if they're currently owned or leased.
My entire point is to dispute the notion that AA is stuck with owned planes because they're secured debt. Certainly, the 777s and the valuable 738s, most 757s and most 763s are in that category. But if some of AA's secured debt is collateralized by MD-80s, the oldest 757s and the oldest 763s, that secured debt isn't necessarily something AA will be stuck with, despite some of your posts to the contrary. We'll see what Horton and the others decide as to the possible hardball on the owned aircraft that are worth significantly less than their value on the date the loan documents were signed.
eolesen
Veteran
- Jul 23, 2003
- 15,940
- 9,371
Agree. CAPA's good at analyzing data, but after reading this, I'm not too impressed with their ability to analyze someone else's published analysis...
Case and point: pointing out dropping the MDW leases as a sign that AA didn't want to compete against WN. Never mind the fact that AA hadn't been at MDW in years, and the lease dropped was likely the manager's office --- all of the above & below the wing services at MDW were contracted from NW or CO if I recall...
Good quote from Bill Swelbar @ MIT today on a combined US-AA:
Really big of you to appreciate a gesture where an employee trashes their own airline.
But your new buddy's bad attitude misses some things, such as: the operational performance (on tiime, completion factor, baggage handling), of US is better than AAs, and most others. The on board service is about the same as other airlines I've been on. The pilot situation is is bad, no doubt, but except for those that live on this board, not a huge issue in day to day ops.
As for DP trying to peddle US, you try to make it sound like a bad thing. He should be. It's the only way to grow in a mature industry.
I'm just a ground worker who is paid well, treated well, and worked hard. And not lusting after AA.
