AA at pension disadvantage!

[WorldTraveler]

Boomer,
it is doubtful that AMR or any company has prepared documents detailing their pension obligatations under the new bill (almost law) other than in a few confidential internal documents. Companies rarely release financial projections based on proposed law other than to make generalized comments. AA will carefully review the law (it's very long and complex) and look for every possibility to to maximize its value. It is doubtful that AA will release detailed projections resulting from the law for several quarters.

 

[Wretched Wrench]

It is doubtful that AA will release detailed projections resulting from the law for several quarters.

It is doubtful AA will release anything unless they have to. And then, they will stall and delay if it is advantageous to them. e.g.Carty's SERP. AA did not release the figures when everybody else did, but delayed to get our concessions locked up.

 

[FWAAA]

Can anyone tell me where I can find an Oxley-Sorbanes certifide document to which Arpey has attached his name that details what the assumed rate of return has been over each of the last twenty years and the specific investments that were made during that period directly compared to the actual performance of those investments?

Additionally, can anyone provide me with the new legislations' legal requirement for any periods' assumed rate of return and a means of verifying that return as opposed to the one assumed?

Trust me, I want to believe that the BS is over; but before I pull the proverbial handle, I'd like to kknow what this bill means to me and I'd like the ability to sue someone if the numbers fail to jive.

The company doesn't make any promises to investors concerning the assumed rate of return on the pension investments, so there are no Sarbanes-Oxley certified statements on which you can try to sue Arpey.

Every year, the company hires actuaries to calculate the accumulated and projected benefits to compute the present value of those benefits (using various discount rate assumptions to reach present value). Against that, it compares the actual amount of assets in the plans. If the plans' performance is spectacular, that narrows the underfunded gap. If performance lags, that increases the required contributions.

Again, the interest rate assumptions are not on the investments in the plans, the assumptions are necessary to reduce the future value of the benefits to present value. Generally, the law specifies what discount rate assumptions are acceptable - this isn't a decision of the company. The new law (see links by AMFAMAN) contain lots of pages on the permitted discount rates.

 

[Bob Owens]

AA has paid minimal amounts of principal since 2003 and has borrowed more money since the concessions were signed. The additional borrowings sort of matched the amount of principal due. Additionally, AA has sold new stock a few times and has sold some convertible debt, too.

I've looked thru the 10-Ks since 2002 and find only small amounts of debt retirement since then. Certainly no $4 billion of debt repayment.

As BoeingBoy pointed out, cash grows because AA is taking more in than it spends. Or borrowing to make up the difference. Or selling new stock. And, as we've discussed before, GAAP profits take into account some non-cash expenses even when total cash on hand is growing.

But now that AA doesn't have the $2.3 billion of pension contributions hanging over its head for next year, it's obvious that it can now begin to pay off some of the massive debt run up in the wake of September 11, 2001.

Or, as I mentioned before, perhaps kick some tires of fuel efficient airplanes at the Boeing showroom. Maybe some of both. Cash is rolling in like gangbusters this year and at the current rate, unrestricted cash should equal $6 billion or so by the end of the year.

First thing that should be paid off? That revolving credit line that carries those minimum liquidity requirements that have you pissed off. B)

If I have $1billion in savings in 2003 and owe $20 billion (in other words owe $19 billion more than I have) and have no meaningful earnings yet three years later have $5 billion, mostly from borrowing, yet still only owe $20 billion how did I do it?

 

[FWAAA]

If I have $1billion in savings in 2003 and owe $20 billion (in other words owe $19 billion more than I have) and have no meaningful earnings yet three years later have $5 billion, mostly from borrowing, yet still only owe $20 billion how did I do it?

Didn't I just cover this? You had positive cash flow and you sold some stock.

The company hasn't had meaningful net income for that period, but it HAS HAD POSITIVE CASH FROM OPERATIONS.

More cash came in from tickets and cargo and nickel and dime fees than AA spent on all its cash expenses. It had non-cash expenses that caused its net income to hover around zero for most of that period, like depreciation and amortization.

If AA has a net loss of $1.00 for a quarter (or net income of the same amount or exactly zero), but it deducted $350 million for depreciation on airplanes it bought a while ago, then its cash position grew during that quarter by $350 million. Over the course of the year, cash might grow by $1.4 billion even though GAAP says net income was zero (or $4.00 plus or minus).

The buildup of cash can occur even when the company reports net losses. I don't know how else to explain it.

 

[Hopeful]

The company hasn't had meaningful net income for that period, but it HAS HAD POSITIVE CASH FROM OPERATIONS.

Then why did Arpey get a 23% raise?

 

[Wretched Wrench]

Then why did Arpey get a 23% raise?

The same reason you got a pay cut.

Because they can.

 

[eolesen]

Then why did Arpey get a 23% raise?

Because he took a bigger overall pay-cut percentage wise than you did? By my calculation, he's earning between 35% and 40% less than Carty was, and doing a far better job.

 

[Wretched Wrench]

Because he took a bigger overall pay-cut percentage wise than you did?

Oh?

That word, overall leaves a bit of wiggle room, doesn't it? Sort of like a welch clause.

By my calculation, he's earning between 35% and 40% less than Carty was

Following Plato's dictum from his Socratic Dialogues, let's first define out terms...... Being paid less than the person you replace is not the same as taking a pay cut. A pay cut is when your paycheck suddenly becomes smaller. Pay cuts are from above. A voluntary reduction in pay is not a pay cut, either, except by Clintonion parsing. When was his pay cut, and by how much?

I don't have the figures in front of me, so correct me if you do.

 

[eolesen]

I don't care what nouns and verbs you want to use, but the guy is making a helluva lot less than Carty was, and is 100% more effective, yet he's bringing home 35% less. If that were to happen to a union worker, you'd be all over it like flies on a turd.

If you were to work as a crew chief but don't get paid the premium, I'm sure you'd consider it a pay cut.

The MD80 captain who gets bumped to the 767 and then 777 without any increase in base pay would also consider it a pay cut.

Maybe he doesn't need the money as badly as you or I do, but the fact still remains that Arpey took on the two corporate titles that Carty held, and didn't receive anything else for it except more responsibility and liability.

The actual numbers are available in the DEF-14 on the SEC website. Have at it.

 

[nbmcg01]

I don't care what nouns and verbs you want to use, but the guy is making a helluva lot less than Carty was, and is 100% more effective, yet he's bringing home 35% less. If that were to happen to a union worker, you'd be all over it like flies on a turd.

If you were to work as a crew chief but don't get paid the premium, I'm sure you'd consider it a pay cut.

The MD80 captain who gets bumped to the 767 and then 777 without any increase in base pay would also consider it a pay cut.

Maybe he doesn't need the money as badly as you or I do, but the fact still remains that Arpey took on the two corporate titles that Carty held, and didn't receive anything else for it except more responsibility and liability.

The actual numbers are available in the DEF-14 on the SEC website. Have at it.

Actually, Mr. Arpey has done no more than his job. He is paid to produce results. Does any other group of workers receive a bonus or raise just for doing their job? I'll bet the f/as would love to receive bonus payments for every "orchid" letter and the pilots for every on time arrival...the list goes on and on. The man did his job. Period.

 

[Boomer]

The company doesn't make any promises to investors concerning the assumed rate of return on the pension investments, so there are no Sarbanes-Oxley certified statements on which you can try to sue Arpey.

Every year, the company hires actuaries to calculate the accumulated and projected benefits to compute the present value of those benefits (using various discount rate assumptions to reach present value). Against that, it compares the actual amount of assets in the plans. If the plans' performance is spectacular, that narrows the underfunded gap. If performance lags, that increases the required contributions.

Again, the interest rate assumptions are not on the investments in the plans, the assumptions are necessary to reduce the future value of the benefits to present value. Generally, the law specifies what discount rate assumptions are acceptable - this isn't a decision of the company. The new law (see links by AMFAMAN) contain lots of pages on the permitted discount rates.

FWAA,
I never asked for any assurance relating to future performance of AMR DBP ROI.

The question is what has been the performance of the DBP ROI over the period prior to enactment of the recently approved bill.

As we all know, the previous legislation allowed corporations to "book" returns they anticipated as realized versus the actual gain realized over that same period and allowed the corporations to continue to "carry forward" those same gains irrespective of the actual performance of the investment.

This is the reason UAL claimed one set of numbers for DBP Underfunding while the PBGC was saddled with a set of numbers they claim was far higher.

Since Congress plans to entertain the issue following the fall break, and the mid-term elections, there should be no corporaate agita if they are allowed to extend the remission period while being forced to come clean with all potential classes of beneficiaries, in a legally binding way, as to their actual performance respective to their future obligations.

As we have seen from the news stories over the last two years: elevating the issue is something Politicians cannot refuse to observe.

 

[Wretched Wrench]

I don't care what nouns and verbs you want to use

Yes, you do. But only when it serves your purpose. As in the aforementioned Clintonion parsing.

The guy is making a helluva lot less than Carty was, and is 100% more effective, yet he's bringing home 35% less. If that were to happen to a union worker, you'd be all over it like flies on a turd.

No, but thank you for the colorful barnyard simile. At least, I hope it was with a barnyard in mind. It definitely raises the cultural level of this forum.

If you were to work as a crew chief but don't get paid the premium, I'm sure you'd consider it a pay cut.

No, again. I have done just that a bunch of times, and it never entered my mind. I did, however, consider that I was doing the company a favor. Or at least my supe. Glad to help out now and then. Also ran the crew when both supe and CC boogied. No biggie. Others do it, too. Never heard it even thought of as a pay cut.

Some time ago, while recovering from an injury, I did clerical work. Using your twisted logic, since clerks make less, I guess I should have considered that a raise.

The MD80 captain who gets bumped to the 767 and then 777 without any increase in base pay would also consider it a pay cut.

Unlike you, I would not attempt to posit the response of a member of another work group. Perhaps a member from flight could weigh in on that.

 

[Boomer]

AA thanks Congress for passing pension reform:



http://biz.yahoo.com/prnews/060804/daf016.html?.v=71

While this looks like good news, I await the spin from the perpetually disgruntled.

Ok, it's some number of years later and after AA filed BK with a $10Billion deficit in their DBP plans. I guess that makes me perpetually disgruntled.

 

[wrencher]

Ok, it's some number of years later and after AA filed BK with a $10Billion deficit in their DBP plans. I guess that makes me perpetually disgruntled.

I remembe when the TWU told us just last year don't worry fellas our pensions are fully funded.