The TWA purchase was just a matter of poor timing. It would have been nice if AA had a crystal ball and could have seen 9/11 happening, then they could have hung onto the cash. I think we all need to remember why this purchase happened anyway. It was in response to UA buying US. AA needed a competitive response and TWA was it.
Aa's Purchase Of Twa
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LaBradford22
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- May 15, 2003
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AAmech said:
Three things:
1. AA did NOT need a competitive response to UA buying US. AA should have reasonably seen that UA buying US was a mistake and could have decided not to emulate it. With almost no exceptions, airline mergers are a bad idea.
2. Regardless of UA and US, TW was posting large operating losses with labor contracts much cheaper than AA's. It doesn't take a rocket scientist to figure out that if you add several hundred million dollars to the operating costs of a company that is already going bankrupt in the base case, you are not going to come out ahead.
3. Even if 9/11 didn't happen, there was about to be a huge falloff in passenger revenue, due in part to a weakening economy but also due in part to an unsustainable fare structure that is just now being corrected (thank you DL). AA should have recognized this years ago and acted on it.
It's not like any other legacy carrier CEO (including Bethune) had a plan for how to avoid falling like a rock when (not if) the economy went into recession. It's not Carty's fault that the market changed, and nobody else that has ever run AA has had a better plan for it.LaBradford22 said:
No, I wouldn't call Carty one of the worst. Just nothing special (in the air or anywhere else).
Think how much better everything would be if only we could look a few years into the future every time we make decisions.
Look at all the $$$ AA wasted on the loser MD-11s. And the F-100s. If only management had known what losers those airplanes would be.
Too bad AA bought back nearly $1 billion of its stock in the several years leading up to September 11, 2001. Poor decision.
Too bad AA committed to invest nearly $2 billion in new terminals/major renovations at JFK, MIA and LAX prior to September 11.
If only AA had invested in Priceline early on (like Delta did). Delta cleared more than $1 billion from its stock in Priceline. Too bad Carty didn't have the vision that DL management did.
It's too bad AA management didn't convert AA to a WN/B6-type airline several years ago.
The real shame is that Carty didn't demand $1.6 billion in concessions from represented employees on about October 1, 2001. Instead, he waited and hoped and prayed that the impact of September 11, 2001 and the 2001 recession would soon blow over and that happy times would quickly return. He implemented all sorts of minor band-aid fixes in an attempt to trim costs but waited until AA was nearly in default of its credit agreements before even broaching the subject of concessions. When combined with the other $200 million (from management and nonunion employees), AA would currently have about $2.4 billion more cash right now (assuming the pay reductions had been effective Jan 1, 2002).
Cryin' shame that AA didn't cut its costs earlier.
I'm sure there are others.
Woulda, coulda, shoulda. B)
Look at all the $$$ AA wasted on the loser MD-11s. And the F-100s. If only management had known what losers those airplanes would be.
Too bad AA bought back nearly $1 billion of its stock in the several years leading up to September 11, 2001. Poor decision.
Too bad AA committed to invest nearly $2 billion in new terminals/major renovations at JFK, MIA and LAX prior to September 11.
If only AA had invested in Priceline early on (like Delta did). Delta cleared more than $1 billion from its stock in Priceline. Too bad Carty didn't have the vision that DL management did.
It's too bad AA management didn't convert AA to a WN/B6-type airline several years ago.
The real shame is that Carty didn't demand $1.6 billion in concessions from represented employees on about October 1, 2001. Instead, he waited and hoped and prayed that the impact of September 11, 2001 and the 2001 recession would soon blow over and that happy times would quickly return. He implemented all sorts of minor band-aid fixes in an attempt to trim costs but waited until AA was nearly in default of its credit agreements before even broaching the subject of concessions. When combined with the other $200 million (from management and nonunion employees), AA would currently have about $2.4 billion more cash right now (assuming the pay reductions had been effective Jan 1, 2002).
Cryin' shame that AA didn't cut its costs earlier.
I'm sure there are others.
Woulda, coulda, shoulda. B)
LaBradford22
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- May 15, 2003
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WN understands that adding an airplane to the fleet doesn't make sense. The added costs of a new fleet type don't outweigh the revenue benefit, especially when you already have other fleet types with roughly the same mission capability and seating capacity. AA clearly doesn't understand this. WN is profitable. AA is not.
WN only buys back a reasonable amount of stock to cover its short position from having granted stock options to employees. AA bought back that plus a ton at a time when airline stocks were pricey. WN would rather focus on running a good airline, AA would rather dink around with its own stock in the capital markets. WN is profitable. AA is not.
AA is sure building a beautiful new terminal for B6, aren't they? If there is one big mistake that AA has made again and again, it's throwing money at facilities. AA has a bunch of corporate real estate managers that need to keep a whole bunch of facilities projects in the pipe or they lose their job. WN has never built a terminal. WN is profitable. AA is not.
AA (or AMR) was busy spinning off Sabre - a highly profitable company - around that time. Once Sabre was spun off, it dawned on AMR that an independent Sabre is no longer motivated to act in the best interests of AA. So, AA went out and created a mammoth management organization called "ITS" (IT Services) to basically manage the relationship with Sabre. So, AMR spun Sabre off and then readded a bunch of Sabre's costs internally, trouble is, AMR no longer sees any of the profits or positive free cash flow generated by Sabre.
I'll grant that this is not something that can be done overnight - replacing fleets takes time, rerationalizing the network takes time, getting employee buy-in takes time, reallocating employees and assets takes time, basically overhauling the whole operation takes a lot of time. It would have to be an evolution, not a revolution, and AA has taken some good steps (simplifying the fleet, depeaking hubs, etc). AA should have started taking these and other baby steps years before it did.
The reason Carty didn't is because the Unions wouldn't have given a single penny without real threat of bankruptcy, which didn't really materialize until early 2003. This was actually one of the wise moves Carty made - going to the Unions in October 2001 would have caused the employees to revolt and burn the place down. Trouble is, an unstoppable fire was already burning, largely started by Carty's mistakes, and the only thing Carty could do was watch it burn and wait until a real crisis was at hand.
That is a bunch of crap! If AA had not acquired TWA's assets then ALL TWA people would have been jobless 4 years ago and the TWA Inc. retirees would have NO retiree medical and NO flight benefits. As I posted earlier, if they had just let TWA shut down completely, that would have been a big help in reducing industry capacity. Even if this had happened there would still would have been many nAAtives laid off like there are now (just like there are layoffs at the other legacies where there was no combining of workforces due to a transaction). If the ex-TWA people had been able to keep their TWA seniority at AA then not only would they have received industry leading wages (at that time) but they would have went right to the top of the combined seniority list and in effect nAAtives would have been stapled below them. As a result, ALL of those laid off would have been nAAtives and would have served as the cushion for ex-TWA people (whose company WENT OUT OF BUSINESS). Compared to the ex-EAL people at AA, the ex-TWA people got a sweet deal. If Crandall was still here at AA, you ex-TWA people and TWA Inc. retirees would have NOTHING because he would have not pursued this transaction.jj said:
LGA Fleet Service
Veteran
Must...continue...to...beat...dead...horse...
I swear it's like "Groundhog Day" with this sh!t...
I swear it's like "Groundhog Day" with this sh!t...
Collosal buffonery by Carty, his execs, and the BOD to buy TWA. Please note that all the guys who flushed all the money down the drain walked away RICH from it.
When I first heard about it, I was stunned and I thought it a pivotal blunder.
1. The capacity wasn't needed.
2. Fleet incompatibilityand huge costs to convert airplanes.
3. Employee integration debacles
4. Unneeded as defense against a UAL - U merger. Should have let Goodwin pay $65 a share for a $15 stock and then let U be an albatross around UAL's neck.
5. Huge hubris on the part of an already incompetent CEO . . Carty.
6. Economy and business travel was already headed in a steep dive while the negotiations were ongoing.
7. TWA routes not needed.
8. STL is a **** of an airport.
911 was a spike, not a fundamental problem. Ticket prices now will not support the excess capacity in the system with fuel prices at $50 and going up.
When I first heard about it, I was stunned and I thought it a pivotal blunder.
1. The capacity wasn't needed.
2. Fleet incompatibilityand huge costs to convert airplanes.
3. Employee integration debacles
4. Unneeded as defense against a UAL - U merger. Should have let Goodwin pay $65 a share for a $15 stock and then let U be an albatross around UAL's neck.
5. Huge hubris on the part of an already incompetent CEO . . Carty.
6. Economy and business travel was already headed in a steep dive while the negotiations were ongoing.
7. TWA routes not needed.
8. STL is a **** of an airport.
911 was a spike, not a fundamental problem. Ticket prices now will not support the excess capacity in the system with fuel prices at $50 and going up.
Taking on a large debt was a big mistake. I am on the street because of a stupid group of so called educated business men. I was bumped to the street by ex-TWA people with 2 years less senority than me. If AA would run their company like we all run our personal finances there would be tons of money for a rainy day or bad times!!!!!!!!
MCI transplant
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- Jun 4, 2003
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aa!---- The I don't like it ether! But for a differant reason! But at least the man is honest about it! I totally agree with him! With the ecconomy going south, had a.a. bought TWA or not, there would have been a RIF! And without the TWA employees there to take the brount of it, you may have been put out on the street!!!!aafsc said:
Lets assume that AA did not purchase TWA's assets and TWA shut down completly and everyone went to the street. AA would have laid off anyway, just not as many people because TWA's shutdown would have done the whole industry a favor by eliminating excess capacity thus reducing the layoffs at the other legacys. Look at Delta, United, Usair , Northwest, etc. All these airlines have laid off tens of thousands of their people and they were not involved in any kind of transaction which involved integrating workforces. What about the ex-TWA people who are bumping nAAtives on to the street at the 25% cities, these poor souls are the "cushion" for the ex-TWA people but you wanted ALL nAAtives to be your cushion. Answer me this, how do you feel about the fact that the ex-TWA heavy maintanence base (MCI) is still here still employing most of it's people (ex-TWA) while UA has basically laid off all it's heavy maintanence mechanics (IND, OAK, with C-checks going out the door real soon) and Northwest got rid of most of it's heavy maintenece (ATL, MSP) and laid off half of them? The ex-TWA people should be very greatful that they are still working at a higher rate of pay than they had at TWA (even after the concessions) and that they can legally rape the nAAtives at 25% cities. If the ex-TWA people were really a cushion, YOU ALL WOULD HAVE BEEN GONE A LONG TIME AGO! You people should stop blaming the nAAtives for your inability to rape all of them!MCI transplant said:aa!---- The I don't like it ether! But for a differant reason! But at least the man is honest about it! I totally agree with him! With the ecconomy going south, had a.a. bought TWA or not, there would have been a RIF! And without the TWA employees there to take the brount of it, you may have been put out on the street!!!!
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