American CFO Horton talks labor issues

[FWAAA]

Or they could stay home and not spend their money, like big business is doing.

Numerous times you have posted that many business travelers have no choice but to travel. Glad to see you've finally come to the realization that the industry you chose, air travel, is mostly discretionary activity.

Would you expect them to report anything but a loss with all their labor groups asking to be released? They would burn the money at this point before they would report a profit.

See, this is an example of the fabrication I mentioned. You're implying that the losses are due to the labor negotiations. Implicit in the above is an assertion that AA would be making money if not for the negotiations.

Hmm, a guy who posts here under a ficticious pseudonym of FWAAA is accusing me of fabrication. I'm I the only one who finds this just a tad hypocritical?

It's the fabricated "facts" that you post. Facts that I post are no less factual when posted under my username than they would be under my legal name. This website (along with many others) permits posting under usernames that are not actual names. That you and a handful of others have chosen to post under names that might be yours (or might not) doesn't make me "hypocritical."

Certianly you are well aware that even if AA is losing money operating they would lose even more if they stopped operating due to a strike. Rents, leases, loans etc all still have to be paid but revenue would stop coming in.

Completely agree with you. That's why I've been operating under an assumption that a work stoppage would precipitate a near-immediate Ch 11 filing to stem the cash outflow once the revenue stops. I understand that you and thousands of others hold out the unrealistic hope that a work stoppage would suddenly cause Arpey & Co. to see the light and agree to sizable percentage increases in your hourly pay and vast improvements in your work rules. I see AA ordering dozens of 747-8s before I see that happening.

You hear the words "Ch 11" and " bankruptcy" and will respond with a demand to stop the "threats" and "fear mongering." You have nothing to fear from a Ch 11 filing unless you hold AMR common stock or unsecured debt.

Posted profits and losses really dont mean much, if they did this industry would have collapsed years ago. People like you would have to settle for the cattle car indignity of SWA or Jet Blue, or hire a charter, but you're probably not quite in that class yet.The airlines drive the economy and if you control an airline you can steer the revenue that airline generates to someplace where you can safely report your profits.

So where is Arpey "steering the revenue?" Which "someplace" holds AA's "safely reported profits?"

 

[limit]

Completely agree with you. That's why I've been operating under an assumption that a work stoppage would precipitate a near-immediate Ch 11 filing to stem the cash outflow once the revenue stops.

Many of my co-workers and I believe ,that AA is trying to force all unions to strike,so that they can file. The offers made up to now, are such, that at least one union will strike.

 

[Bob Owens]

Numerous times you have posted that many business travelers have no choice but to travel. Glad to see you've finally come to the realization that the industry you chose, air travel, is mostly discretionary activity.

Find me one example of where I said that anybody has to travel. I've said that if they travel they have limited choices. If they travel to certain places they have to pay whatever the airline chooses to charge. They always have the option to stay home but most people want to travel and if they want to go long distances, or across the pond then they pretty much have to fly.

See, this is an example of the fabrication I mentioned. You're implying that the losses are due to the labor negotiations. Implicit in the above is an assertion that AA would be making money if not for the negotiations.

Who is replying to what they think was written instead of what was written now? Where did I say that they would be making a profit if not for negotations? I said "they would burn the money at this point before reporting a profit".

Implying is not fabrication, nor did I say that the losses are due to negotiations, the losses are due to fixed expenses and expenditures that the company chooses to make. They could be making payments ahead of time, like maybe they will pay the entire $500 million to the pension this quarter instead of spreading it out over a few quarters, maybe they will buy some fuel hedges, prepay some loans, stock up on parts, there are all sorts of ways that companies can manipulate their numbers to show losses, the Feds only get concerned when they do the opposite. Being too honest and conservative with your liabilities and debts is not frowned upon. But really, do you think that with the flexibility that the company has with their finances that they would be posting profits? If it was you would you post profits at this point?

This website (along with many others) permits posting under usernames that are not actual names. That you and a handful of others have chosen to post under names that might be yours (or might not) doesn't make me "hypocritical."

Sure it does, you start off every post under a fictional fabricated name because you want to hide your identity, thats your right. Nowhere in the rules does it say you cant be a hypocrite so citing the rules of the website doesnt free you from the charge.But when you call others out for proof and facts while hiding behind an alias its hypocritical, at least IMHO.

Completely agree with you. That's why I've been operating under an assumption that a work stoppage would precipitate a near-immediate Ch 11 filing to stem the cash outflow once the revenue stops. I understand that you and thousands of others hold out the unrealistic hope that a work stoppage would suddenly cause Arpey & Co. to see the light and agree to sizable percentage increases in your hourly pay and vast improvements in your work rules. I see AA ordering dozens of 747-8s before I see that happening.

Well I'm willing to take that chance because I dont have much to lose.

So where is Arpey "steering the revenue?" Which "someplace" holds AA's "safely reported profits?"

I'm not an accountant but we can see that AMR is bringing in a lot more money than they used to, paying us a lot less than they used to and they are reporting bigger losses than they used to. The money is going somewhere.Granted fuel eats up a lot of that additional revenue but not all of it(diverts profits to oil companies, primarily owned by banks and other large financial institutions).

I think the banks are also taking a bigger chunk through interest charges and fees. It was reported that just to file for a loan restructing can cost millions of dollars. Then there's the $1000 toilet seats(diverts profits to companies outside the airlines, probably primarily owned by banks and other large financial institutions) and the 30% jack up in landing fees (funnels money to the bondholders of the airports-primarily banks and other large financial institutions). The purchase of new aircraft, which means more debt, which means more revenue funneled to the banks or other large financial institutions through interest payments. Theres a reason why 78% of AMR is owned by Institutional Investors, I dont think they are in it to lose money.

To make it even simpler, if I owned enough stock to control an airline that generated $20 billion/year in revenue and I was able to steer some of that revenue into my bank through Loans, contracts with other vendors I own, airports that I own, hotels that I own, oil companies that I own then if it the airline showed a loss most years, but that kept labor costs in check, then it could be worth it. Obviously the less that labor got the more I could get. So maybe I wont make money on my shares (but if I can thats even better) but the revenue generated by the business activity of the airline makes my other ventures profitable. If the airline stopped operating they wouldnt burn the fuel, pay the rents and fees, buy the parts etc. Its worth it to keep the airline unprofitable as long as they arec paying everything else, but if I let them show profits then labor, and the airlines require a lot of labor, labor with specialized skills that are not easily replaced, will demand more. If they get it I wont be able to make as much because wages and profits are inverse.The airlines wouldnt be able to pay the outrageous landing fees, theb outrageous price for parts, the million dollar fees to apply for restructring a loan etc.Thats what I think has been going on in this industry for years, can I prove it, no. Just as you and most economists cant prove most economic theories because of the complexity of it all.But how is it than a private industry can lose money more years than it earns for over 30 years and still exist? Why would large financial institutions desire to own and control such an industry?

 

[FWAAA]

AA doesn't need all three unions (or any of them) to strike to be able to file Ch 11; AA could file a bankruptcy petition this afternoon if AA wanted to.

 

[Bob Owens]

AA doesn't need all three unions (or any of them) to strike to be able to file Ch 11; AA could file a bankruptcy petition this afternoon if AA wanted to.

Exactly, thats why we should not give it one iota of consideration, other than having an alternative job should they do it.

 

[FWAAA]

Find me one example of where I said that anybody has to travel. I've said that if they travel they have limited choices. If they travel to certain places they have to pay whatever the airline chooses to charge. They always have the option to stay home but most people want to travel and if they want to go long distances, or across the pond then they pretty much have to fly.

About that bolded portion, I'm too lazy today but if I have some time later, I'll post links.

Who is replying to what they think was written instead of what was written now? Where did I say that they would be making a profit if not for negotations? I said "they would burn the money at this point before reporting a profit".

Posting that management would burn money before reporting a profit because of the labor negotiations is ludicrous. Posting that the current losses have anything to do with the labor negotiations is slanderous.

Implying is not fabrication, nor did I say that the losses are due to negotiations, the losses are due to fixed expenses and expenditures that the company chooses to make. They could be making payments ahead of time, like maybe they will pay the entire $500 million to the pension this quarter instead of spreading it out over a few quarters, maybe they will buy some fuel hedges, prepay some loans, stock up on parts, there are all sorts of ways that companies can manipulate their numbers to show losses, the Feds only get concerned when they do the opposite. Being too honest and conservative with your liabilities and debts is not frowned upon. But really, do you think that with the flexibility that the company has with their finances that they would be posting profits? If it was you would you post profits at this point?

Bob, we've been over this before several times, but you simply don't understand accrual accounting. I'm not an accountant either, but I've taken some accounting classes (pretty much required for a business school degree). Payments made ahead of time are not reflected on the income statement until those payments are due.

The timing of the cash contribution to the pensions has nothing to do with the size of the income or loss - the pension contribution will not show up on the income or loss statement no matter when it is made. The actual pension checks distributed are a component of income or loss.

Prepayment of loans has nothing to do with income or loss. If they did that, it would reduce the size of the cash balance, but payment (or prepayment) of loans are not expenses. Despite your assertions, expenses are not so easily manipulated. The size of the cash balance can be manipulated by prepaying loans or stocking up on parts or prepaying other expenses.

If you don't believe me, then ask a real-life accountant whether AMR has the "flexibility" to magnify the size of its losses by prepaying expenses ahead of time.

I'm not an accountant but we can see that AMR is bringing in a lot more money than they used to, paying us a lot less than they used to and they are reporting bigger losses than they used to. The money is going somewhere.Granted fuel eats up a lot of that additional revenue but not all of it(diverts profits to oil companies, primarily owned by banks and other large financial institutions).

I think the banks are also taking a bigger chunk through interest charges and fees. It was reported that just to file for a loan restructing can cost millions of dollars. Then there's the $1000 toilet seats(diverts profits to companies outside the airlines, probably primarily owned by banks and other large financial institutions) and the 30% jack up in landing fees (funnels money to the bondholders of the airports-primarily banks and other large financial institutions). The purchase of new aircraft, which means more debt, which means more revenue funneled to the banks or other large financial institutions through interest payments. Theres a reason why 78% of AMR is owned by Institutional Investors, I dont think they are in it to lose money.

To make it even simpler, if I owned enough stock to control an airline that generated $20 billion/year in revenue and I was able to steer some of that revenue into my bank through Loans, contracts with other vendors I own, airports that I own, hotels that I own, oil companies that I own then if it the airline showed a loss most years, but that kept labor costs in check, then it could be worth it. Obviously the less that labor got the more I could get. So maybe I wont make money on my shares (but if I can thats even better) but the revenue generated by the business activity of the airline makes my other ventures profitable. If the airline stopped operating they wouldnt burn the fuel, pay the rents and fees, buy the parts etc. Its worth it to keep the airline unprofitable as long as they arec paying everything else, but if I let them show profits then labor, and the airlines require a lot of labor, labor with specialized skills that are not easily replaced, will demand more. If they get it I wont be able to make as much because wages and profits are inverse.The airlines wouldnt be able to pay the outrageous landing fees, theb outrageous price for parts, the million dollar fees to apply for restructring a loan etc.Thats what I think has been going on in this industry for years, can I prove it, no. Just as you and most economists cant prove most economic theories because of the complexity of it all.But how is it than a private industry can lose money more years than it earns for over 30 years and still exist? Why would large financial institutions desire to own and control such an industry?

Ok - so if the owners of AMR stock also own stock in greedy banks and greedy oil companies like XOM, then it doesn't matter whether AMR ever reports a profit. Fair enough.

 

[Bob Owens]

About that bolded portion, I'm too lazy today but if I have some time later, I'll post links.
Posting that management would burn money before reporting a profit because of the labor negotiations is ludicrous. Posting that the current losses have anything to do with the labor negotiations is slanderous.

I would think that a lawyer would know the definition of slanderous. Do you honestly expect us to believe that the company would not try any manipulate the finances to make things look as bad as needed in order to better position themselves to get concessionary deals from their workers? There are many business decisions that have a big effect on their numbers and you seem to think that the state of labor negotions has nothing to do with those decisions, while this might be a good arguement for AAs lawyers in front of a PEB its doubtful that any neutral would believe it.

If you don't believe me, then ask a real-life accountant whether AMR has the "flexibility" to magnify the size of its losses by prepaying expenses ahead of time.

Like I said there are many ways, so please stop trying to BS us by picking out one thing and tying it up to a specific qualification. The fact is that businesses dont only do things to position themselves for labor negotiations but they manipulate the timing of expenses to lower their tax burden. I threw in the prepayment because thats part of what went into the $3.5 billion they claimed they lost in 2002. Sure maybe that wasnt what the income statement said but thats the number they sold to the unions. I really dont care about your technicalities I challenge what the company says to us.

Ok - so if the owners of AMR stock also own stock in greedy banks and greedy oil companies like XOM, then it doesn't matter whether AMR ever reports a profit. Fair enough.

The point is that the industry will continue to operate no matter how much money the airlines claim to lose because the industry is an engine for many other ventures. We should not allow what a company claims to make or lose determine what we charge. If AA cant pay then let them shut their doors, somebody else will fill the vacuum. Maybe they wont hire all of us, or maybe they can pay us. Its a chance we have to take.

 

[FWAAA]

I would think that a lawyer would know the definition of slanderous. Do you honestly expect us to believe that the company would not try any manipulate the finances to make things look as bad as needed in order to better position themselves to get concessionary deals from their workers? There are many business decisions that have a big effect on their numbers and you seem to think that the state of labor negotions has nothing to do with those decisions, while this might be a good arguement for AAs lawyers in front of a PEB its doubtful that any neutral would believe it.

Perahaps your tinfoil hat is slowing you down? Seriously, the airline's finances are crappy enough without the executives manufacturing bad news or "manipulating" the numbers.

Like I said there are many ways, so please stop trying to BS us by picking out one thing and tying it up to a specific qualification. The fact is that businesses dont only do things to position themselves for labor negotiations but they manipulate the timing of expenses to lower their tax burden. I threw in the prepayment because thats part of what went into the $3.5 billion they claimed they lost in 2002. Sure maybe that wasnt what the income statement said but thats the number they sold to the unions. I really dont care about your technicalities I challenge what the company says to us.

So pointing out that it's factually impossible to alter the size of profit or loss by accelerating payments of debt or stocking up on parts is "BS?" Detailing the mistakes in your post is "BS?" Enjoy ignorance, then.

You're confusing the company's 2003 deceptions. The $3.5 billion loss was magnified by writing off about a billion or more of goodwill, not by prepayment of debt or expenses. You're thinking of the low cash balance, which was reduced by prepayment of expenses, some of which were required by vendors who adopted "cash up front" policies with AA. My opinions can certainly be BS, but verifiable facts are not.

It's difficult keeping the concepts straight, but doing so will help you. Speaking of which, I'm not trying to "BS" you by pointing out your accounting ignorance, I'm trying to help. But like a drowing man who refuses to grab the life ring thrown to him, you persist in alleging that companies can manipulate their net profit or losses by paying things early. It's almost as if you were insisting that the ocean is filled with fresh water and that the Great Lakes are filled with salt water. Remember the doofus a few years back who insisted that a 3% raise to three different workgroups would increase AA's costs by 9%? Your allegation that AA can control its profit or loss number by pre-paying various expenses is as laughable. You're an educated man and yet when I post that the earth is round, you respond with "That's BS; the earth is flat." BoeingBoy is obviously smarter than I am - and he was certainly right about this forum and too many of its participants.

The point is that the industry will continue to operate no matter how much money the airlines claim to lose because the industry is an engine for many other ventures. We should not allow what a company claims to make or lose determine what we charge. If AA cant pay then let them shut their doors, somebody else will fill the vacuum. Maybe they wont hire all of us, or maybe they can pay us. Its a chance we have to take.

Good luck with that.

 

[AANOTOK]

Oh the humanity! Or is it, serenity now, serenity now! :wacko:

 

[TWU informer]

Perahaps your tinfoil hat is slowing you down?

What is the fetish that you and eolesen both have with the tinfoil hat anyway? I actually view this as an attack on an individuals mental health. And for the record, I also believe that AA management manipulates the books and finances.

 

[upsilon]

What is the fetish .. with the tinfoil hat anyway

Google is your friend.

 

[JimJimmyJim]

To all those stat people out there. How often since deregulation has AA turned a yearly profit? I doubt it's much more than 5 years. So why would the employees of AA base their compensation on company profit? The management team in place now should have too. They don't. It's all of those management types to figure out a way to turn a profit not mine or Bob's, Informers, Chuck's, or Ken's. What I am saying is that it's time to get it from somewhere other than the employees both, union and non union employees of AA. We've tried that and it didn't work. AA isn't going to file bunkruptcy or get rid of OH. You know why? Because then they loose control. AA doesn't want to open their books up to outsiders and have to depend on foriegn repair stations to get the work out and do it right the first time.

 

[FrugalFlyerv2.0]

Oh the humanity! Or is it, serenity now, serenity now! :wacko:

These pretzels are making me thirsty!!!

 

[BoeingBoy]

To all those stat people out there. How often since deregulation has AA turned a yearly profit? I doubt it's much more than 5 years.

Nine years since 1994, which is as far back as the annual reports are available on the AA webside. '92-'94 and most of the '80's were generally good periods for the airlines, so I'd guess 15-18 years since deregulation (about 1/2 the years) but that's only a guess.

Jim

 

[frontline]

What is the fetish that you and eolesen both have with the tinfoil hat anyway? I actually view this as an attack on an individuals mental health. And for the record, I also believe that AA management manipulates the books and finances.

If you really believe that you should call the SEC and report them.

Do you really think they are that stupid? This isn't Enron. Airlines (almost all of them) have been losing lots of money this decade. It isn't like AA is the only one.