AA and US merger?

[WorldTraveler]

FWIW, AA has been writing down it's owned aircraft since getting them - it's called depreciation. What hasn't been "written down" (lowered) is the EETC payments, other than whatever little (if any) they were able to do in 2003. That's the problem the EETC holders face - the collateral for their EETC's has less book value than the payments reflect in many cases.

Now, who's been "arguing that AMR will write down owned aircraft or reject leases on over 400 aircraft in the mainline fleet and hundreds more in the owned fleet [presumably you mean Eagle fleet] and leave BK with virtually no vestiges of its former fleet?" I think what FWAA has been saying, and know that I have been saying, is that the older planes have lost enough value to get the EETC holders to agree to lower payments or, for any that don't agree reject the planes. Past bankruptcies show that most EETC holders will see lower payments as being preferable to taking an airplane - these are people in the financial business - even individuals - not airplane brokers. When they got the EETC, of a share of one, the last thing on their mind was getting an airplane. They just wanted the interest.



Oh, now I see who's been saying that AA will exit BK "with virtually no vestiges of its former fleet." Seems it has been you.

Jim

let's see now... we have had how many predictions published and on here of how AA would dump the M80 fleet and 50 seat RJ fleet and throw in most of the 757 fleet as well so that they would be ready to receive this brand new $25B worth of orders - which by the way even at the accelerated pace they will be delivered won't be completely delivered until 2017 and beyond... so no the notion that AA can dump the current fleet in BK seems a bit fanciful even the 50 seaters... you can either get rid of the current fleet and shrink the airline or you can keep the part of the existing fleet that is necessary to operate the airline as is until the new fleet arrives.
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Yes, we do understand the concept of depreciation... it is considered by lenders. Again, FWAAA somehow thinks that the lenders will be caught red-handed with assets that are far less valuable but loaded with debt.
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Let's see how it all plays out.... AA/AMR will be able to reject some leases, they will be successful at reducing some aircraft payments - that is part of the BK process. But the notion that AA can walk away from its obligations on the majority of its fleet or will be able to reduce sky high payments down to the equivalent of bus fares is more than a stretch.
Other airlines reduced their aircraft costs dramatically in BK... but they largely held onto the aircraft for which they negotiated new terms.... perhaps some here will be surprised to learn that those finance companies will put out their calculators and decide that they are better off in the long run taking back AA's aircraft NOW rather than taking huge haircuts for a couple years at which point AA wants to dump the planes when the new fleet arrives.
Thus, AA can either reduce its aircraft costs dramatically now or give up the fleet. As with all things, I think there is a balance that will see AA keep alot more of its current fleet at rates higher than it wanted in order to have the freedom to get rid of or keep parts of its fleet over the next 5-7-10 years instead of just 2-3.
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Oh, AA can indeed have its cake and eat it too- but then the creditors decide they will sell the airline and get more money that way....Or we can settle for the example of US who really did reduce its aircraft obligations by substantial amounts - but it took 2 BKs to do so.
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Neither the idea of a 2nd BK (which would for all practical purposesbe the 3rd for AA employees) or the idea of selling the airline is terribly palable, so perhaps AA will be forced to take a little less than some here think they will get in return for having some stability about the future of the company.

 

[BoeingBoy]

Other airlines reduced their aircraft costs dramatically in BK... but they largely held onto the aircraft for which they negotiated new terms....

But for some unspecified reason, AA won't be able to do that? And will exit BK ""with virtually no vestiges of its former fleet." You claim that others are wrongly saying that AA will dump large numbers of planes? But you're right in saying that AA will dump virtually it's entire fleet? Dr Jekyll or Mr Hyde today?

BTW, US did take 2 BK's to lower fleet costs, but they were short - 18 months total (6 months for the 1st and a year for the 2nd), and part of that was due to working out the merger details to incorporate into the POR in BK II.

Jim

 

[eolesen]

Dr Jekyll or Mr Hyde today?

ROTFL...

One thing I've learned after 25 years in the industry --- AA's got some smart lawyers and finance people. They know a lot more about aircraft finance and leasing than a former RM guy who mainly relies on press releases and SEC filings...

 

[usa1]

Bankruptcy will help American Airlines slash costs, but Chapter 11 is not a silver bullet for operational problems that dropped American from its top position among U.S. carriers to No. 3 in the last few years, experts say ....... "Those cost problems don't address the top-line revenue problem, which is that American now has a tier-three network. "They are now third choice (for business travellers) behind United Continental (NasdaqGS: UAUA - news) and Delta-Northwest."

http://uk.finance.yahoo.com/news/Costs-key-AMR-fleet-routes-reuters_molt-3493388472.html?x=0&.v=1

 

[WorldTraveler]

Jim
YOU are the one who seems to keep repeating this idea that I have said AA will have no vestiges of its former fleet when it walks out of BK... I have said all along their ability to reduce their fleet is limited by the amount of loss their total creditor pool will accept before they say it is no longer worth restructuring the company.
Doesn't matter how good the lawyers are... and others somehow seem to think that the debt holders and leasing companies don't have smart lawyers too. At some point they consider it in their best interests to either take back the assets or reject the POR from the company.
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Instead of resorting to character assassination in an attempt to cover the fact that you are proven wrong, just drop the subject and move on.
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We can talk for months about what will end up - but I'm ok w/ checking back at the end of the BK and see what AA still has.
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I'll go on record now as saying that AA will succeed in reducing some of its aircraft costs... but getting rid of 400 mainline aircraft worth of debt and leases and even more on AE equipment and keep them for only a couple more years is just not going to happen.

 

[BoeingBoy]

And that comes from your statement that "it doesn't change the fact that AA has far more aggressive plans to dump its fleet than any other carrier has had." No one else that I've seen has put a number or even qualifier to how many planes AA will actually get rid of while in BK. I know that I certainly haven't.

It doesn't take that much a an EETC/lease payment reduction when averaged across the entire fleet of 800 or so airplanes (including Eagle) to make a sizable reduction in expenses. $1,000 average per plane would be $800,000 per month or nearly $10 million a year. $5,000/month/plane average would be $48 million million/year. Etc. I feel pretty confident that the EETC holders, especially, would not rather accept those cuts on 20 year old planes than take possession of 20 year old planes, when the EETC/lease payments for that plane are in the $60,000 to $80,000 per month and up range.

Throw in parking some planes for a $60,000-$70,000 per month saving at least and as the saying in Washington goes, pretty soon you're talking about real money. And that's just one of the potential cost savings available in bankruptcy before even talking about the employees.

Jim

 

[The Dissident]

Just wondering if anyone was paying attention to the DWH hanger yesterday where allegdly there was a US Air 737 parked out in front of it and allegedly a bunch of suits got off it.

 

[TWU informer]

Just wondering if anyone was paying attention to the DWH hanger yesterday where allegdly there was a US Air 737 parked out in front of it and allegedly a bunch of suits got off it.

Hard for me to believe that knowing you and today's technology we don't have some proof.
LOL

 

[Buck]

Just wondering if anyone was paying attention to the DWH hanger yesterday where allegdly there was a US Air 737 parked out in front of it and allegedly a bunch of suits got off it.

Got a call an hour ago concerning this very subject. A suit did get off, however so did some mechanics and there was some kind of maintenance issue that had to do with the gear..........

 

[damajagua]

Just wondering if anyone was paying attention to the DWH hanger yesterday where allegdly there was a US Air 737 parked out in front of it and allegedly a bunch of suits got off it.

??????

 

[Maark767]

Just wondering if anyone was paying attention to the DWH hanger yesterday where allegdly there was a US Air 737 parked out in front of it and allegedly a bunch of suits got off it.

Do you mean DFW?

 

[The Dissident]

Hard for me to believe that knowing you and today's technology we don't have some proof.
LOL

There you go again carrying water for the company.

 

[TWU informer]

There you go again carrying water for the company.

Damn, I meant that as a compliment. Not sure about carrying water for anybody.
You in Texas now?

 

[Maark767]

Well look like US and AA have a strong chance of becoming one....
There is allot of rumor out there.........and I wish AA the best of LUCK....hopefully when AA come out of this merger....they will become stronger with a partner...to compete with the giant DL and UA.....

Wonder how many employees AA would be furlough before merging with US? What will be outsources? Any though?



AMR Corp. 's bankruptcy filing has paved the runway for speculation about a possible a merger between American Airlines and US Airways Group Inc. , Bloomberg Businessweek reports.

Such a union could help the two carriers become more competitive in terms of size and costs, analysts said.

A spokeswoman for American Airlines said the company doesn’t “comment on rumors.”





http://www.bizjournals.com/kansascity/blog/morning_call/2011/11/analysts-predict-liftoff-for-american.html?ana=yfcpc

http://www.bizjournals.com/stlouis/morning_call/2011/11/amr-bankruptcy-may-lead-to-merger-with.html?ana=yfcpc


In the past seven years, Parker has bid for four airlines, three of which were in bankruptcy. In 2004, as CEO of America West, he bid for bankrupt ATA. In 2005, he oversaw a merger with bankrupt US Airways.

In 2006, he bid for bankrupt Delta>(DAL_). In 2008, he sought a merger with United(UAL_), following a course set by predecessor Steven Wolf, who pursued United in 2000.

Now, in every corner of the airline industry, speculation abounds that Parker will make a move on American in bankruptcy court.



http://www.thestreet.com/_yahoo/story/11327010/1/why-us-airways-wants-a-deal-with-american.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

Thats not what AA is telling its employees.

 

[mike7863]

Hard for me to believe that knowing you and today's technology we don't have some proof.
LOL

my buddy texted me a nice pic of the usair 737 sitting in front of dwh.