AA signs new lease at love field,

[FA Mikey]

I am not sure how strategic a move it is. AA has had its butt handed to it on every attempt to compete head to head at love field. Faced with abysmal load factors out of Love Field to the Texas and Missouri cities, American Eagle pulled out of those routes last year and began flying six daily nonstop flights to Chicago. After a strong start, the airline has seen a decline on the Dallas-Chicago route: from 11,616 passengers in July, to 6,250 in January, the last month for which figures are available.


more story here

 

[FA Mikey]

Thank God AA is making room for Delta to add service to Love field.

Delta Air Lines is expanding its global network to offer customers nonstop flights to Dallas' Love Field Airport. Effective July 6, 2009, Delta will offer three new daily round-trip flights between its Memphis, Tenn. hub.

full story here

 

[eolesen]

Yes, I'm sure the service to MEM will be almost as successful as their failed attempts at DAL-ATL a few years back...

 

[Bob Owens]

I doubt AA had to pay much money upfront for the lease extension - unless DAL requires that rent be paid years and years in advance.

So if AA signs a lease for 17 years for say $10 million a year then they can add $170 million to their total debt and liabilities cant they?



So they dont have to pay much up front, dont have to pay interest on it because its not due yet but it gets added to the boogie-man factor of how much the company owes out. Back in 2003 we were given the figure of over $20 billion in Total Debt and Liabilities.

This is yet another example of the company hiding money and creating figures to make them look worse off than they are so the employees wont get a hold of it.

Total Debt = Short Term Debt +Long Term debt

Short term debt-any debt incurred by a company that is due within one year. The debt in this account is usually made up of short-term bank loans taken out by a company.

Long Term Debt-Loans and obligations with a maturity of longer than one year; usually accompanied by interest payments. also called funded debt.

It's like when I borrowed $100k for a mortgage I owed the bank over $260,000. So I could then claim that I owed out $260,000 in Total debt to whoever was interested and still be considered truthful. I could later prepay the principle or renegotiate the interest rate and significantly lower my debt without lowering my assetts by the same amount. In other words I could eliminate $260,000 worth of Total Debt by simply paying out just $100,000, (and this is with an 8% rate).

This is one of the reasons why workers should ignore the figures the company gives out and simply focus on what we need to get paid. The numbers dont matter, they never did, because if they really did matter this industry would have dissappeared over 75 years ago.

How many times have we heard that this industry never made profits?

How many times have we seen figures that show the billions of dollars that the industry has "lost"?

I've been hearing this for the last 30 years.

Back when all them brand new Airbuss's rolled into the hangar the industry was operating at a loss. Back when AA starting accepting delivery of those brand new MD-80s the industry was operating at a loss. My guess is back when the company was accepting delivery of the brand new DC-3 the industry was operating at a loss.

Now we see 77 new 737s coming on line within the next two years and guess what? The industry is operating at a loss!!!!

Let them throw whatever figures they want out, ignore it, everybody else does. Airports are still raising their fees, oil companies took as much as they could. Suppliers are getting theirs. The executives still get theirs-they arent worried. The more we worry about their numbers the worse our individual numbers get. The more we give back the more everyone else gets to take. Even as "the pie" has gotten bigger our piece gets smaller! Wage expense is smaller now than its ever been.

According to all the experts this industry has never been profitable and it never will. Even if we paid to work here they would find a way to show a loss in order to try and get us to pay more for the privilidge of making them money.

Thats right, despite the fact that the airlines operate at a loss we are making huge amounts of money for others. $23.7 BILLION dollars last year went through AA. That $23.7 billion was generated through our labor. We generated more money and they laid out less than ever for our labor. $4000 landing fees. $100 departure taxes, $4.50 per Passenger fees, $1000 toilet seats, $750,000 tractors, billion dollar terminals, multimillion dollar aircraft and lets not forget what was it over $950million in interest payments directly from the airline?

Let somebody else subsidize the industry. Lets get our money for what we do.

 

[Skymess]

Uh, we tried that strategy. We fought them tooth and nail through every possible court to prevent changes to the Wright Amendment. They pretty much won every time.

When the last change was made that allowed them to fly to MCO and STL non-stop, we moved into Love in a big way with mainline flights to MCO, STL, AUS, and SAT. They beat us like a rented mule. I live in Dallas, but I am based in STL. I never once saw more than 40 passengers on 140-seat MD-80 on the DAL-STL run in either direction. I remember one flight where we had 2 revenue passengers and 22 non-revs. Not a money-maker.

The object is not about profit but to take up space so they can't have it. Then, as Eolsen stated, when the Wright expires we can fly out of there if we want to. If we maintain our gates we have the option, if we don't than we have no options.

 

[FWAAA]

So if AA signs a lease for 17 years for say $10 million a year then they can add $170 million to their total debt and liabilities cant they?

Nope. The future rent is not added to the balance sheet.

So they dont have to pay much up front, dont have to pay interest on it because its not due yet but it gets added to the boogie-man factor of how much the company owes out. Back in 2003 we were given the figure of over $20 billion in Total Debt and Liabilities.

The 2003 figure you were given included no advance operating lease payments. AMR's debt on 12/31/02 was over $22 billion not counting any future operating lease payments.

This is yet another example of the company hiding money and creating figures to make them look worse off than they are so the employees wont get a hold of it.

Uh huh.

It's like when I borrowed $100k for a mortgage I owed the bank over $260,000. So I could then claim that I owed out $260,000 in Total debt to whoever was interested and still be considered truthful. I could later prepay the principle or renegotiate the interest rate and significantly lower my debt without lowering my assetts by the same amount. In other words I could eliminate $260,000 worth of Total Debt by simply paying out just $100,000, (and this is with an 8% rate).

Only if you borrowed the money from a consumer finance company like The Associates that used the "rule of 78s" in computing your interest payments. Total of payments is almost never the amount of your "debt."

This is one of the reasons why workers should ignore the figures the company gives out and simply focus on what we need to get paid. The numbers dont matter, they never did, because if they really did matter this industry would have dissappeared over 75 years ago.

Agreed. No wonder the company beats you like rented mules every time it negotiates a contract with the TWU. Far too many members and leaders have no real working knowledge of basic financial accounting. They read the 10-K and make wild, fantastic, wild-eyed assumptions that turn out to be inaccurate.

It might do your work group some good if the members educated themselves about the true finances of AMR.

 

[eolesen]

Cue Jack Nicholson: "You can't handle the truth!".....

 

[Bob Owens]

Nope. The future rent is not added to the balance sheet.

Once again the Lawyer in you comes out. Trying to stay factual but not Truthful. My question included Liabilities.

From Investopedia,

Long-Term Liabilities
What Does Long-Term Liabilities Mean?
Recorded on the balance sheet, a company's liabilities for leases, bond repayments and other items due in more than one year.

The 2003 figure you were given included no advance operating lease payments. AMR's debt on 12/31/02 was over $22 billion not counting any future operating lease payments.

No but IIRC it had an item about prepaid leases. If you borrow money to prepay leases you can turn those future leases into current debt.

Only if you borrowed the money from a consumer finance company like The Associates that used the "rule of 78s" in computing your interest payments.

So in other words it can be done.

Agreed. No wonder the company beats you like rented mules every time it negotiates a contract with the TWU. Far too many members and leaders have no real working knowledge of basic financial accounting. They read the 10-K and make wild, fantastic, wild-eyed assumptions that turn out to be inaccurate.

It might do your work group some good if the members educated themselves about the true finances of AMR.

Only if they were considering investing what little money they have in the airline. Which even Crandall recommends not to do. The whole point is this is not a profitable industry, but it makes a lot of money for everyone else. If we use the industries profits to set our pay rates then we are the only ones in the game to do so and we will continue to lose. As we shrink our piece of the pie in the hopes of achieving profitability it just gives everyone else in the game the opportunity to take a bigger bite. We need to set our rates on what we need and take our chances, and thats a lot less risky than adopting the philosophy that if we give enough in concessions that we will achieve financial security.

 

[FWAAA]

Once again the Lawyer in you comes out. Trying to stay factual but not Truthful. My question included Liabilities.

From Investopedia,

Long-Term Liabilities
What Does Long-Term Liabilities Mean?
Recorded on the balance sheet, a company's liabilities for leases, bond repayments and other items due in more than one year.

No but IIRC it had an item about prepaid leases. If you borrow money to prepay leases you can turn those future leases into current debt.

No, Bob. AMR's balance sheet does not contain an entry for the aggregate lease payments. The aggregate lease payments are disclosed in Note 7 of the 10-K, entitled Leases, but the balance sheet (showing all debt, liabilities and obligations) does not contain a line item for future lease payments the way you alleged (rent mulitiplied by lease term).

At 12/31/02, future lease payments totaled $16.3 billion, and that number was not included in the "$20 billion" debt figures you were given by the liars at the company. You may be thinking of this footnote in Note 7:

(1) As of December 31, 2002, included in Accrued liabilities and Other liabilities and deferred credits on the accompanying consolidated balance sheets is approximately $1.7 billion relating to rent expense being recorded in advance of future operating lease payments.

The $20 billion doesn't include that $1.7 billion. If you add up all the items on the 12/31/02 balance sheet, the total debts, liabilities and obligations totaled $29.2 billion, and that number includes that $1.7 billion. It does not include the $16.3 billion of future lease payments discussed above.

As an aside, Dallas Love Field takes in just over $10 million a year in total rents, so I'd guess that AA's rent is a mere several hundred thousand a year (at most), given that WN is the largest tenant and controls most of the terminal space and gates.

Extending the DAL lease had to be done if AA wanted to be able to fly from there once the new terminal is complete around the time the Wright Amendment expires. And while the annual rent is a big deal for Dallas Love Field (with their $38 million annual budget), the annual rent doesn't amount to a rounding error at AMR (probably far less than $1 million a year).

 

[Bob Owens]

No, Bob. AMR's balance sheet does not contain an entry for the aggregate lease payments. The aggregate lease payments are disclosed in Note 7 of the 10-K, entitled Leases, but the balance sheet (showing all debt, liabilities and obligations) does not contain a line item for future lease payments the way you alleged (rent mulitiplied by lease term).

Well I think we've been down this road before but I'll say it again, quarterly reports that are submitted and put out for public consumption are not a very detailed or forensic report of a corporations finances but more of a general overview with the intent of providing an investor enough information to make a somewhat informed investment while at the same time protecting management strategy and trade secrets. The most important thing about these reports is that they disclose whatever bad news there is. They are imperfect documents.

So the fact is no matter how insistant you are, no matter what figures you selectively pull off those reports and how you identify them, you simply can not prove that they havent done what I've said they may have done.

 

[eolesen]

You also can't prove or disprove that the Easter Bunny exists, or that Benny Hinn actually healed a few people...