AA's CFO says Integration going well

[WorldTraveler]

1/2 of a percent DOES make a difference when you are talking about hundreds of millions of dollars of cargo revenue per year.

I never said otherwise.

What I have consistently said - and which you and others STILL refuse to acknowledge - is that the difference in AA's int'l system LF and that of DL and UA's is between 3 and 6 points which makes a FAR bigger difference.

Many people have tried to argue how AA would generate profits on par with other airlines and yet I will tell you that is impossible to do when AA is flying around tens of thousands of seats per month that they are not filling while their competitors are, esp. when AA is not getting revenue at the level that other carriers are on many of those flights.

Cargo does matter. I never said otherwise.

But a couple percent of cargo revenue is immaterial compared to the far larger impact of incurring costs and not obtaining revenue for passenger services.

 

[700UW]

Hmm, what airline had the largest quarter profit ever?
 
That would be the new AA.

 

[LD3]

Good point - I didn't realize that.   Perhaps cargo will play a bigger part at new AA than it played at old US.   
 
In 2013.  AA's cargo revenue (not including US) was $676 million, same as 2012, on $25.8 billion of revenue.
In 2013,  US' cargo revenue was $154 million on $14.6 billion of revenue.   
 
Cargo revenue was 2.62% of AA's total revenue in 2013 while at US,  it comprised just 1.05% of total 2013 revenue.  
 
Compared to checked bag fees and ticket change fees, etc.,  cargo is small potatoes.   

10/20/14 AA goes to a single cargo operation.. http://www.aircargoworld.com/Air-Cargo-World-News/2014/09/american-schedules-cargo-transition/6758

 

[WorldTraveler]

Hmm, what airline had the largest quarter profit ever?
 
That would be the new AA.

and on an operating margin basis, AA's profits have been smaller than DL or WN.

and based on guidance from AA, DL, and WN, AA's profit for the current quarter which ends in about 2 weeks will be lower than DL and WN as well.

and that is precisely the point of this thread.

You and others have touted for months how large AA would be.

You may think that being the biggest is the goal. That is Aeroflot kind of thinking.

The goal of a for profit company is to be the most profitable. Given the differing size of airlines, profitability is measured on a margin basis, not absolute dollars.

AA should be the most profitable based on its larger size. It has a disproportionately larger domestic system than DL and UA and RASM reports since the AA/US merger have shown that domestic is the strongest part of the US airline system; it is also why WN's system RASM is outperforming the network carriers since WN is almost entirely a domestic airline.

The current AA/US merger was cobbled together from AA's global network plus that of US which was the most domestic network of all of the remaining legacy carriers along with a smattering of TATL flights that were possible by low labor costs and the ability to undercut the competition because of US' size.

AA/US cannot undercut competitors anymore because their competitors can now do the same thing that to AA. The DOJ highlighted that in its review of the AA/US merger and that is precisely why AA/US had to divest more in its merger than any other airline merger in history.

Further, AA/US' labor costs are rising and are not low enough to offer low fares even where US once could.

AA is still the third largest int'l carrier behind UA and DL. Horton and Parker both had separate strategies for AA and US to grow their int'l networks based on AA's need to develop a presence where it had a disadvantage and US' based on its lower costs - but in both cases those strategies are no longer financially viable if AA wants to report margins comparable to other carriers.

If you want to defend AA's size, then you should be the VERY FIRST to stand up and say "but AA isn't the most profitable compared to our peers because AA has chosen to use BK provided labor cost cuts and to reduce our earnings in order to grow our network" because that is EXACTLY what AA is doing.

And until AA chooses to fly only as much capacity as it can profitability fill at LFs comparable to its peers and at fares comparable to the rest of the industry, they will underperform the industry's strongest airlines on profitability and they will also have to carry more employees on the payroll than they otherwise would if they flew only the network they could profitably fill at industry comparable LFs and fares.

Other airlines are simply using their assets more effectively and are generating higher profits compared to AA.

You and others should not be the least bit surprised or defensive when comparisons of AA vs. other carriers show AA in a disadvantaged position.

 

[jcw]

we know AA is a loser airline and will never perform to the level of DL

 

[MetalMover]

we know AA is a loser airline and will never perform to the level of DL

I can only imagine you are responding to WT as DL is mentioned and I have him on ignore....
Best advice I have received here is to put the trolls on ignore.

 

[WorldTraveler]

we know AA is a loser airline and will never perform to the level of DL

no. just no.

I didn't say that, don't believe it, and I am very sorry if that is what you believe that I am saying.

What I have consistently said is that AA, unlike its other US airline peers, has been willing to reduce its profitability in order to achieve strategic goals which involve growing its network.

It is highly significant to the subject that AAL stock growth has underperformed its 3 US airline peers over the past month and even 3 months after coming out of BK and the merger with great expectations among analysts.

All US airlines are first and foremost for-profit companies.

Airlines in many parts of the world are or have been government subsidized which has allowed them to make strategic decisions which could not be sustained if they had to report profits on par with other companies.

IN fact, for much of deregulation, US legacy airlines accepted well below average profitability, in part because they could not effectively compete with low cost carriers.

Bankruptcies at all of the nationwide legacy carriers and maturity and consolidation in the low cost and legacy sectors has provide the opportunity for US airlines to make money in the domestic market - and a lot of it.

Perhaps it is solely a function of AA and US' smaller int'l networks, but unlike DL and UA, AA has thrown a lot of capacity into int'l markets - both before and after the merger.

It clearly matters to you and others how AA does relative to its competitors including DL which came out of BK with a laser-like focus on becoming first and foremost a solidly profitable company.

and DL has succeeded. Not only do they have the highest market capitalization of any airline in the western world but they also are one of the very few companies listed on Wall Street that right now have a 100% buy rating from every analyst that covers it.

DL is not the only airline that has figured out how to run a very good business as well as multiple aspects of an
airline.

in fact, it is CO's financial success in the 90s and early 2000s and WN's financial success decade after decade that has undoubtedly brought DL leaders to the reality that they have to compete in the same financial league.

There may be some of you who don't want to hear the reality of what is taking place that affects AA, but it is taking place whether you hear or acknowledge it or not.

AA IS capable of competing financially on the same level as the most profitable airlines in the world.

But it cannot continue to make strategic decisions which diminish profitability and also expect to compete at the same financial levels as their peers who do not operate with that mindset.

 

[jcw]

once again every comparison you do is to how DL is outperforming AA - so you don't act like you are not saying how AA will never become DL
 
We all get the reality of AA is subpar to DL - we get it - you tell us every day

 

[robbedagain]

so true jc  so true    sad  aint it!!!!

 

[Bob Owens]

and on an operating margin basis, AA's profits have been smaller than DL or WN.

and based on guidance from AA, DL, and WN, AA's profit for the current quarter which ends in about 2 weeks will be lower than DL and WN as well.

and that is precisely the point of this thread.

You and others have touted for months how large AA would be.

You may think that being the biggest is the goal. That is Aeroflot kind of thinking.

The goal of a for profit company is to be the most profitable. Given the differing size of airlines, profitability is measured on a margin basis, not absolute dollars.

What a dick. Bla Bla Bla.

AA and US are still operating as two carriers where as DL has been one, with all the synergies in place, for many years.

How profitable was DL in the early stages of their merger with NWA?

How profitable was DL six months out of BK?

I'm not a defender of AA management by any means but your posts are getting dumber by the day. Just face the facts, DL is not number one any more. Does it really matter? You can still be a cheerleader for number two.

 

[Bob Owens]

All US airlines are first and foremost for-profit companies.

Since when? Airlines make profits for banks, Airports, Oil companies and other suppliers where they charge the airline $500 for something that sells in Home Depot for $20. They also provide transportation to people to get to Hotels where they Spend $200 a night just for a place to sleep and go to restaurants and attractions and spend money that fuels their profits.

Airline workers and their Unions need to remember this and start getting their share of the pie as well. Forget profits, everybody else in the game is still getting their cut, except maybe the travel agents, nobody else in this is "making sacrifices" to get to sustained profitability because thats something that will never happen. Even the airports have jacked up their landing fees by 30% while we were giving concessions. It costs over $4000 lust to land a 777 at JFK. Sure we may see a few years of massive profits but when contract time rolls around you can be sure that all the profits will somehow be gone. Our share is being robbed so the banks can get dividends on top of the interest and fees they get.

 

[WorldTraveler]

once again every comparison you do is to how DL is outperforming AA - so you don't act like you are not saying how AA will never become DL
 
We all get the reality of AA is subpar to DL - we get it - you tell us every day

except YOU are the one that has repeatedly said and apparently believe that AA is subpar to DL, not me.  

I have noted that AA is using its resources to add capacity to markets where it isn't strong enough as a result of the merger - and it is costing them the ability to perform at the same level of financial performance.

AA, not DL, and certainly me, is making the determination as to where they want to be in the industry and parker and co. know full well that every industry is based on comparisons between competitors.

And you and others do too... you didn't have any problem posting articles about how well AA would do as a result of the merger.
 

AA and US are still operating as two carriers where as DL has been one, with all the synergies in place, for many years.

How profitable was DL in the early stages of their merger with NWA?

How profitable was DL six months out of BK?

I'm not a defender of AA management by any means but your posts are getting dumber by the day. Just face the facts, DL is not number one any more. Does it really matter? You can still be a cheerleader for number two.

and again, Bob, you miss the point that being number 1 in size doesn't matter.

what does matter is to maximize profitability. AA BY ITS OWN CHOICE and with no respect to the merger is putting way more capacity into the market than can be profitably filled... .that and that alone is why AA is underperforming its peers in the industry on RASM performance after the merger and BK just as they did before and while in BK.

DL, quite simply, did not go thru BK or come out doing the same thing.

And neither does WN or AS, other carriers which are rated equally high by analysts.

The question, plain and simple, is whether AA wants to use its resources to continue to grow into markets and do it all right now and do so at the risk of underperforming the industry - which is what they are doing - or accept that they cannot have the "perfect" route system right now.

DL and UA could undoubtedly add a lot more capacity and fill out the holes in their network but they aren't doing more than they can support while meeting their own goals.

AA's strategies have nothing to do with where they are in relation to the merger or where DL or anyone else was at the same point.

Perhaps, once again, the international network for 2014 was already set by the time the merger was consummated and Parker will pull back.

Either he can reign in the "developmental"growth that AA has engaged in to maximize profitability or AA will underperform the industry.

it is really quite simple.

BTW, AA does report its financial and traffic reports as one airline. It has chosen to present itself as a single airline regarding finances and network.

 

[robbedagain]

2 very well spoken posts bob 

 

[swamt]

^^^^^^Yea what he said^^^^^^   And such the perfect description from Bob in his first sentence in post # 55.  And so deserved...

 

[WorldTraveler]

none of which changes the fact that AA is the ONLY US legacy airline that had lower load factors in every one of their international regions for the most recent month.

The merger may have been 9 months ago and AA may have committed to its int'l schedule, but there has been more than enough time to cut capacity that couldn't produce the revenues that AA can use to operate on a comparable basis as other carriers.

The simple fact is that AA is using its BK obtained pay cuts in order to subsidize the growth of its network and has yet to make the tough calls regarding cutting year around capacity; the winter capacity cuts were a good start but there is clearly more to be done.

Parker doesn't want to alienate labor this early in the merger but the only way he can cut unproductive capacity out of its system is to cut employees - and he is not willing to do that.

Not a single fan or investor in AAL will be able to compare AA's performance to carriers that have made those tough choices - and those carriers didn't try to use their mergers and BKs to add more capacity to their networks beyond what could be flown with comparable profitability to the industry.

it's not pleasant to hear that you have given up hundreds of millions of dollars in concessions, created the world's largest airline, but yet mgmt. feels the need to continue to add and sustain routes that cannot be operated on a comparable basis to the rest of AA's existing system.

but that IS where AA, its employees, and its investors are right now.