American Airlines is thriving despite bankruptcy

[FWAAA]

What has been happening recently at American Airlines? Its management has gone rather quiet since entering Chapter 11 bankruptcy last year. Inevitably, questions will arise: About progress on restructuring, when it will emerge from Chapter 11, and how it will successfully relaunch on a profit trajectory.

So far, the answers look promising. The company bullishly predicts exiting from Chapter 11 in late 2012. Revenue has improved across all regions of the business. Domestic unit revenue was up almost 10 percent and Latin American revenue has increased by close to 11 percent in the first quarter of 2012 compared to the same period the prior year. American Airlines is performing better than other airlines that have filed for protection and has done so without slashing capacity. In short, American is doing the right things to return to business efficiency and customer effectiveness.

http://www.usnews.com/opinion/blogs/economic-intelligence/2012/06/15/american-airlines-is-thriving-despite-bankruptcy

Smarty pants academic thinks he knows everything. This guy must be on the payroll. He obviously has no idea what he's talking about since he doesn't work for AA.

Here's his bio:

http://www.tuck.dartmouth.edu/faculty/faculty-directory/thomas-c-lawton/

 

[Bob Owens]

All the more reason why we should say NO to more concessions!!

 

[Freighterguynow]

Dead last in on time performance - Winnning!

 

[FWAAA]

All the more reason why we should say NO to more concessions!!

Does it really matter if you vote "NO?" In other airline bankruptcies, concessions happen whether you vote to approve them or not.

Anyway, the point of the guy's article is that AA's revenue is improving just fine, something that hasn't always been the case with airlines in bankruptcy. The other half of the restructuring, lower labor costs, is still necessary and will happen in a just over a week.

Dead last in on time performance - Winnning!

Yes, the irrelevant government on-time statistics.

Here's the list:

1HAWAIIAN AIRLINES 94.4
2AIRTRAN AIRWAYS 94.0
3DELTA AIR LINES 90.9
4ALASKA AIRLINES 90.6
5US AIRWAYS 90.6
6MESA AIRLINES 89.2
7SOUTHWEST AIRLINES 87.0
8JETBLUE AIRWAYS 86.8
9VIRGIN AMERICA 86.7
10SKYWEST AIRLINES 85.0
11AMERICAN EAGLE 84.8
12FRONTIER AIRLINES 82.7
13EXPRESSJET AIRLINES 82.6
14UNITED AIRLINES 81.6
15AMERICAN AIRLINES 81.4

There is no demonstrated correlation between financial success and the irrelevant on-time rankings.

In April, AA and UA were essentially tied for last place, yet AA reported a unit revenue improvement of 11.6% despite the poor on-time performance. UA's unit revenue improvement? A paltry 5%. If AA can turn in a PRASM improvement of 11.6% every month compared to 5% at UA, then I say don't mess with the on-time performance.

In May, AA's unit revenue improvement was higher than UA, DL or US. On-time stats don't pay for fuel, wages or airplanes. Large unit revenue improvements pay for all of those things.

 

[etops1]

Wow ! One positive article about AA and you just go bananas huh? When everyone else and their mother knows full well that AA's stand alone planned is deeply fLawed . But ,what ever helps you sleep at night I guess .

 

[etops1]

Is that the only one you can find ? I am sure there's gotta be tons more ..

 

[Buck]

Question: American Airlines says that their "Labor CASM " is the highest in the industry. Why are these ratings not broken down into each work classification?

Mechanics, Fleet Service, Stores etc.. for the TWU
the Pilots and the Flight Attendants.

 

[Bob Owens]

Does it really matter if you vote "NO?" In other airline bankruptcies, concessions happen whether you vote to approve them or not.

Anyway, the point of the guy's article is that AA's revenue is improving just fine, something that hasn't always been the case with airlines in bankruptcy. The other half of the restructuring, lower labor costs, is still necessary and will happen in a just over a week.


Yes, the irrelevant government on-time statistics.

In May, AA's unit revenue improvement was higher than UA, DL or US. On-time stats don't pay for fuel, wages or airplanes. Large unit revenue improvements pay for all of those things.

It may be necessary to reach a 17% EBITAR but is it necessary for the company to survive, compete or even thrive? I think NOT. Your post proves that.

None of the other airlines that went into BK went in with over $4 billion in cash and the lowest labor rates in the industry.

If the Judge abrogates what is he basically saying? So if United decides they want a 25% EBITAR then they too can file C-11, then an 1114e (until the Unions submit in the 1113 process) and have the court impose whatever UAL says is necessary for them to reach that 25% EBITAR? Was that the intent of C-11? If so then working people need to throw the whole Bankruptcy Code out like has been done at least twice before, or at least C-11.

Why do you suppose that AA did not file an 1114e? Could it be that they would have had a hard time proving their case? Could it be that if they had forced the court to rule that the court may have tipped them off that they risk destabilizing the whole system?

The fact is we are at the bottom of the industry. The current language and the concessions already agreed to allows AA to cut their labor costs far in excess of their "Ask". They simply want more, they dont need it, cant prove they do, they simply want to make more profits than the rest of the industry combined and they are trying to use BK to do it. Their excuses are flimsy. They same they need to show an EBITAR of 17% because "Thats what the analysts would like to see". That these long term concessions to attract capital, but they leave out the fact that they were awarded financing with all their contracts in mediation with all the groups having asked for a release.

I've said it before, We keep our tools on wheels for a reason. Mechanics would be better off to see AA liquidate than accept the terms they are trying to jam down our throats.

You're right, on time performance means nothing, ,,as long as there isnt much excess capacity out there and people are left with few options.

 

[Bob Owens]

Question: American Airlines says that their "Labor CASM " is the highest in the industry. Why are these ratings not broken down into each work classification?

Mechanics, Fleet Service, Stores etc.. for the TWU
the Pilots and the Flight Attendants.

Apples to Oranges.

I have little doubt that AA's labor costs for maintenence, despite our much lower wage is higher than competitors, however it should be because we do 90% in house. What AA wants to do is still keep most of it in house but have the same labor costs. They want the same labor costs as competitors without doing what competitors did to achieve such low costs-transfer maintenence costs to the non-labor side of the ledger. AA's labor cost advantage will be hidden on the non-labor cost side of the ledger. In fact it was the labor costs that hid the fact that AA's non-labor costs were really excessive.

What AA did over the last nine years was inflate their non-labor costs. They did this by paying for things they should have, would have, shed in BK back in 2003. Things like leases on Fokkers, terminals and other facilities they did not use ect ect. Lets not forget they bought every seat on Eagle as well. This of course made the owners of those properties (Banks and other large financial Institutions) very happy. Free money. Wiithout all this stuff that AA could have shed in BK back in 2003 AA's non-labor costs would have been much lower than competitors but the analysts dont look that deep. They dont look to see why AAs non labor costs are high because they are in-line with competitors(who outsource).They assume that all the airlines are the same. So the fact that AA's non-labor costs are higher than they should be does not draw their attention, after all they are doing an "Apples to Apples" comparison across the industry, without digging too deep into the details. They see that AA's non labor costs are pretty much "in line" with competitors, so they move on, then they get to labor costs and they see that they are much higher, so from their superficial point of view there lies the problem. They dont ask why their non-labor costs are only "in line" when they should be much lower. They focus and write about AA's "Labor cost problem".

Everyone always cites how dumb AA management is. Well are they? I dont see it that way, I see them as diabolical. Really they played this pretty well. They lowered the bar in 2003, made the banks super rich despite all the so called losses(so they didnt have to share it with the government) and now they are trying to do it again.

They admitted in court that if they get what they want not only would they have the lowest labor costs but they would also have the lowest non-labor costs because they would be using BK to shed all those underwater leases etc. The banks dont care, they already got an extra 10 years of free money from those assetts, now they will write them off and make a killing on the equity they are given as creditors.

Thats what this is all about, making others richer at our expense.

 

[AAviator]

Is that the only one you can find ? I am sure there's gotta be tons more ..

Can ju explain thees one Lucy?
In Parkers presentation to shareholders

http://phx.corporate...TF8VHlwZT0z&t=1

page 14 shows AAs relative market position, as well as LCCs.

On page 16, he goes on to say that LCC doesnt need to consolidate despite a much smaller market presence..(not to mention LCC has employed what is basically a cornerstone strategy of their own).

How is it that LCC can pull it off, being dead last in total market share, and AA cant when we havent even seen the AA (with lower costs) restructuring plan?

IF LCC is truly -fine-, then why is Parker going ape#### about this merger right now withh all the risk and uncertainty? Doing so, adds structural problems to AAs network that arent fixed without a lot of pain, mostly on the LCC side, and leaves the most obvious, important structural problems, i.e., the largest markets on the planet critical to a competative global alliance un-fixed.

Dont get me wrong, Parker may have the best plan as far as the creditors are concerned, buut as far as the long term health of the airline goes, well, that remains to be seen.. I personally would prefer not to see it happen.

 

[DCaf]

Can ju explain thees one Lucy?
In Parkers presentation to shareholders

http://phx.corporate...TF8VHlwZT0z&t=1

page 14 shows AAs relative market position, as well as LCCs.

On page 16, he goes on to say that LCC doesnt need to consolidate despite a much smaller market presence..(not to mention LCC has employed what is basically a cornerstone strategy of their own).

How is it that LCC can pull it off, being dead last in total market share, and AA cant when we havent even seen the AA (with lower costs) restructuring plan?

IF LCC is truly -fine-, then why is Parker going ape#### about this merger right now withh all the risk and uncertainty? Doing so, adds structural problems to AAs network that arent fixed without a lot of pain, mostly on the LCC side, and leaves the most obvious, important structural problems, i.e., the largest markets on the planet critical to a competative global alliance un-fixed.

Dont get me wrong, Parker may have the best plan as far as the creditors are concerned, buut as far as the long term health of the airline goes, well, that remains to be seen.. I personally would prefer not to see it happen.

I'll take a stab at this. Parker's going "ape####?" I don't know if I'd call it that, but what sort of behavior would you expect from a CEO pushing a merger, laconic disinterest? As to your main point of how AA and US would manage without a merger, I would guess that he thinks they would survive, but that both would be more successful after consolidating. Neither would have any hope of catching UA/DL size-wise without it.

 

[AAviator]

nonsense.

http://en.wikipedia....s#By_fleet_size

An AA,B6 combination smokes deltas (the largest) fleet size, when you include deliveries that have begun and deliveries that are right around the corner.

My concerns are the rationalization of the domestic hubs, and no true solution in the largest markets AA trails in. If anything, a merger with LCC with PHL a stones throw away from JFK, complicates a true NYC strategy, and once again on the west coast, LCC brings nothing close to resembling a solution to the Pacific problem

Future orders at AA will be on the property looong before Parker can scedule paint jobs on the LCC fleet..

Dont forget, LCC still has 37 seat DH-*s flying around and the majority of the rj's are 50 seaters.. Any new EMB170/175 orders can come just as fast to any new combination be it LCC/AA or LCC/B6.

Sorry DCaf.. Parker is going bananas with this opportunity... Mostly because he has to. I see his need, Im just not convinced we need him. In fact, longer term a combination with LCC can be, and will most likely be detrimental to AA.

 

[FWAAA]

It may be necessary to reach a 17% EBITAR but is it necessary for the company to survive, compete or even thrive? I think NOT. Your post proves that.

AA has not publicly released its EBITDAR target (it's been redacted in everything I've seen). Are you disclosing the actual (confidential) EBITDAR target or is this a number you backed into thru some revelation of the profit sharing that you claim a company lawyer disclosed?

Do you know what UAL's EBITDAR was in 2011? 15.9%. How about DAL? 14.6%

Even assuming that your oft-repeated claim of 17% is accurate, that's not an outlandish target to shoot for given the competition's actual results from 2011.

None of the other airlines that went into BK went in with over $4 billion in cash and the lowest labor rates in the industry.

You and other employees say this over and over and over, as if the amount of cash in the bank has anything to do with the airline's ability to raise your pay. The bolded portion of your sentence above is misleading. AA has the highest labor costs of any network legacy airline, despite the very low hourly pay rates for the mechanics. AA's pilot and FA block hour costs are the highest in the industry until their contracts are abrogated. Fleet is similarly too expensive, and they've already agreed to changes.

If the Judge abrogates what is he basically saying? So if United decides they want a 25% EBITAR then they too can file C-11, then an 1114e (until the Unions submit in the 1113 process) and have the court impose whatever UAL says is necessary for them to reach that 25% EBITAR? Was that the intent of C-11? If so then working people need to throw the whole Bankruptcy Code out like has been done at least twice before, or at least C-11.

I don't know the answer to your questions, but I do know that your contract is likely to be abrogated in just over a week regardless of the answers. What UAL may or may not do in the future - that has very little to do with the here and now at AA.

Why do you suppose that AA did not file an 1114e? Could it be that they would have had a hard time proving their case? Could it be that if they had forced the court to rule that the court may have tipped them off that they risk destabilizing the whole system?

I don't know. I mistakenly assumed on November 29 (and I probably posted it somewhere) that AA would likely seek large hourly payrate cuts from the pilots and FAs, along with some reductions from all other workgroups. On that, I was wrong, as AA is not seeking large hourly payrate cuts from either the pilots or the FAs - instead demanding more productivity. From what I can see, AA is seeking large hourly paycuts from the agents and, of course, from the AMTs that are downgraded to OSMs.

Why didn't AA seek 1114 relief? I think the answer is that 1114 is usually used for hourly payrate cuts, and since AA is attempting to cut pay via productivity and other workrule changes (that reduce headcount), there wasn't the immediate fire like there was at US and UA that caused those airlines to seek 1114 changes right away. The $4 billion in cash gave AA some breathing room to work thru the 1113 process without seeking 1114 interim relief.

The fact is we are at the bottom of the industry. The current language and the concessions already agreed to allows AA to cut their labor costs far in excess of their "Ask". They simply want more, they dont need it, cant prove they do, they simply want to make more profits than the rest of the industry combined and they are trying to use BK to do it. Their excuses are flimsy. They same they need to show an EBITAR of 17% because "Thats what the analysts would like to see". That these long term concessions to attract capital, but they leave out the fact that they were awarded financing with all their contracts in mediation with all the groups having asked for a release.

Yes, your (TWU M&R) hourly payrates are at the bottom. Problem is, AA's total maintenance costs are the highest per ASM, according to AA on the DoT filings. If I were management, spending hundreds of millions on bankruptcy lawyers and other parasites, I would probably seek the biggest cuts I could, because of the fear of not doing it right the first time - recall that USAir filed a second time not too long after its first botched Ch 11 case. If you think that filing Ch 11 is sign of failure, it's nothing compared to the failure of having to do it a second time in two years because you didn't fix the problems in the first Ch 11 filing.

If AA's employees had any competent negotiators or negotiating skills, they wouldn't get worked up over the size of the potential profits AA wants to make after Ch 11 - they would simply make sure they negotiated iron-clad, bullet-proof, generous "me-too" clauses that would enable everyone to share in those profits before management got a turn at the trough.

I've said it before, We keep our tools on wheels for a reason. Mechanics would be better off to see AA liquidate than accept the terms they are trying to jam down our throats.

What are you waiting for? You and the other 10,000 M&R employees have had more than six months notice that AA would seek massive concessions. Yes, you've posted repeatedly that abrogation may cause massive walkouts, and some pilots and FAs have made similar claims. My guess is that some will stay home and some will turn in de-facto resignations (the employees may call it a wildcat strike) but in all likelihood, most will continue to show up for work, just like they did at every other airline that was in bankruptcy.

You're right, on time performance means nothing, ,,as long as there isnt much excess capacity out there and people are left with few options.

For the last several weeks, AA has been picking up some business from disenchanted UAL customers. And so far in the first five months of this year, Horton & Co. have been more successful at jacking up fares (the higher unit revenue I've been talking about) than either UA or US. Only DL has kept pace with AA in PRASM increases, and AA even overtook DL in May due to Southwest targetting ATL and imposing some fare discipline on DL.

 

[DCaf]

nonsense.

http://en.wikipedia....s#By_fleet_size

An AA,B6 combination smokes deltas (the largest) fleet size, when you include deliveries that have begun and deliveries that are right around the corner.

My concerns are the rationalization of the domestic hubs, and no true solution in the largest markets AA trails in. If anything, a merger with LCC with PHL a stones throw away from JFK, complicates a true NYC strategy, and once again on the west coast, LCC brings nothing close to resembling a solution to the Pacific problem

Future orders at AA will be on the property looong before Parker can scedule paint jobs on the LCC fleet.

Wow, being dissed by an AArogant AAviator (redundant, I know). I'm hurt. But, if you think AA will close the size gap with the big boys by virtue of the ballyhooed aircraft on order, I think you are dreaming. Merging with JetBlue would work out much better for you seniority-wise wouldn't it? No competitive issues in NY with that merger huh?

 

[700UW]

Wrong, 1114 affects the retirees and the pension, try again, I been on a Negotiating Committee and the 1114 was a total separate committee made up of retirees.

Section 1113 e is interim/emergency relief, US used it against us in the second chapter 11 filing.