American to end Etihad and Qatar Codeshares

[jimntx]

In protest of the government subsidies given to each carrier.

http://atwonline.com/open-skies/ame...m=email&elq2=d4c8bd251ec4472dbfc6c657e7222bac

No codeshares, but business as usual otherwise.

 

[robbedagain]

in my opinion that's kind of stupid esp given that Qatar is part of OneWorld However I did not know that AA had an agreement with Etihad

 

[Jester]

Probably a matter of who benefits more from the relationship. I don't pretend to know the details as to how revenue would be divided through a code share agreement. However, if it is based upon distance where QR flies DOH-JFK/LAX/ORD with AA picking up the much shorter distance flying, those gulf carriers might be getting the lion's share of the traveling revenue.

Tough to publicly decry the massive amounts of government subsidies to the gulf carriers to AA's detriment and then say, "Let's do business together!"

 

[jimntx]

Note my comment in OP...Business as usual except for codeshares is mentioned in the articles. They can still book passengers on each others flights and transfer commercial loads between the airlines. I'm guessing that both airlines will actually net more money from the flights once codesharing ceases. I don't really know how much passenger business AA was sending to each.

 

[eolesen]

I'd the subsidies make for a reasonable excuse.

The prorated share of tickets on a codewhoring segment can be more advantageous to the marketing carrier than they are to the operating carrier. For interline, it's usually higher yielding for the operating carrier. Of course, that's all negotiated and super secret.

In a mutually beneficial and balanced agreement, it's usually a wash to take a slight loss on an operating segment.

My guess (and it's only a guess) is that this was a highly disproportionate agreement where QR and EY were using AA to provide more last-mile service vs. the volume of people who would be electing to fly on EY or QR after originating on AA.

It's no great loss. There are only a few places you couldn't reach on AA using another oneworld carrier.

 

[jack f]

Probably a matter of who benefits more from the relationship. I don't pretend to know the details as to how revenue would be divided through a code share agreement. However, if it is based upon distance where QR flies DOH-JFK/LAX/ORD with AA picking up the much shorter distance flying, those gulf carriers might be getting the lion's share of the traveling revenue.

Tough to publicly decry the massive amounts of government subsidies to the gulf carriers to AA's detriment and then say, "Let's do business together!"

We, the travelling public, should be decrying the massive amounts of government subsidies the US Carriers have gotten through bankruptcy. I'm pretty sure AA did C11 once and USA did it twice.

 

[eolesen]

OK, I'll bite. Specifically, what taxpayer money subsidized any of the US carriers thru bankruptcy?...

Seems to me that every dollar written off came from shareholders, investors, suppliers and employees.

 

[USFlyer]

Air Transportation Stabilization Board. That said, I think all of the loans the ATSB backed were paid back, with the ATSB actually making money.

 

[eolesen]

Yep. A loan isn't anywhere near a subsidy. Feel free to correct me, but I thought that "normal" banks issued the loans at market rates or slightly below, and they were just backstopped by the ATSB i.e. had the loans gone into default, ATSB would have made the banks whole.

As a program, I also recall it made money because of the interest paid. Similar to the "bailouts" at Chrysler and GM that were done along similar lines i.e. commercial financing with government backing.

 

[john john]

Did US UA NW DL AA get tax relief in bankruptcy court?

Did Congress provide tax relief to the airline industry?

 

[eolesen]

Nope.

Taxes can't be vacated or reduced by a bankruptcy court, with a few exceptions for back taxes older than three years.

The IRS allows companies to carry forward net operating losses from previous years to offset future tax liability, but that's available to everyone, not just airlines or companies who declare bankruptcy. Individuals also can carry over certain losses on investments, so it's not just a corporate perk...

The only airline-specific piece of legislation I can recall in the last 20 years was a provision which allowed airlines to extend out the timeframe in which they had to make up for underfunding. It didn't relieve them of present or future liability -- it simply allowed them to contribute a little less over a longer time to make up for projected shortfalls in funding for future liabilities. It was also subjective -- live pensions had one timeframe while distress terminated pensions had a longer timeframe, which wound up penalizing carriers like AA who hadn't distress terminated their plans...

 

[jack f]

OK, I'll bite. Specifically, what taxpayer money subsidized any of the US carriers thru bankruptcy?...

Seems to me that every dollar written off came from shareholders, investors, suppliers and employees.

I wasn't clear in attempting to make my point. My point was that bankruptcy court allows these companies (any company) to restructure their business on the backs of others; employees, suppliers etc. I was trying to make the point that if that isn't subsidization I don't know what is.

 

[eolesen]

Yeah, not buying that. The textbook definition of a subsidies is a financial contribution which helps underwrite the actual cost of providing a product to try and make it more affordable.

Bankruptcy isn't a cake walk, and consumers rarely benefit from it. You have several wildcard scenarios where a trustee or creditors committee can wind up booting management to the curb (e.g. AA & Tom Horton, US and Wolf/Gangrene, CO and Lorenzo), or having to make a case for cause in court (e.g. AA not being able to abrogate the pilots contract on the first try).