AMR loses $452 million in first quarter, excluding special items

[The Goose]

Jamie's a smart guy. I put more faith in what equity analysts like Jamie and Gary Chase have to say vs. the industry analysts like Mike Boyd who like to hear themselves talk...



I can see the next theme emerging: Wall Street says AMR is in deep trouble, and employees will respond by saying the books are cooked, analysts are crooked, and the company can afford billions in raises and snapbacks on workrules....

You're probably right, but it's obvious somebody in AMR's (mis)management has more than just a little respect for Jamie Baker, otherwise they'd be taking a shot at the analyst for asking such a question as "is this all you've got to show?" Nothing but circular doublespeak in responses to any posed question from the analyst. That's rather troubling.

Could it be someone finally realizes a simple "thank you" doesn't pay the fiddler?

 

[Hopeful]

I can see the next theme emerging: Wall Street says AMR is in deep trouble, and employees will respond by saying the books are cooked, analysts are crooked, and the company can afford billions in raises and snapbacks on workrules....

Far be it from Arpey and Co. to be dishonest towards the investors and public, I guess they are above the corporate ethics pedestal.
Amazing how Arpey and Co. can do no wrong in your eyes, Eric.

Just remember all those Wall St. firms who had a CEO state at one time or another that "ALL IS OK"......months before either shutting their doors or getting bailed out.


Yep, they can do no wrong.


BTW, I think I figured out your preference of Jamie Baker over Mike Boyd.....
From time to time, Boyd sides with the workers and that just plain out doesn't sit well with you.

 

[FWAAA]

You're probably right, but it's obvious somebody in AMR's (mis)management has more than just a little respect for Jamie Baker, otherwise they'd be taking a shot at the analyst for asking such a question as "is this all you've got to show?" Nothing but circular doublespeak in responses to any posed question from the analyst. That's rather troubling.

Could it be someone finally realizes a simple "thank you" doesn't pay the fiddler?

I couldn't believe it when Baker monologued that criticism of Arpey (hard to call it a question). Analysts on quarterly conference calls are usually a lot more deferential toward the CEO and CFO.

And Arpey's response didn't instill confidence. In fact, Arpey's entire performance on Wednesday was much less polished than usual. His reading of his script (before Horton's discussion of the numbers) was stilted and poorly timed.

Still, if Baker was looking for big changes like abandonment of International First Class or a merger with another airline, he was on the wrong conference call. After all, it has been a huge recession and historically, AA loses huge amounts of money in big recessions. When business travel returns, AA tends to turn it around somewhat. Last decade, of course, not so much, what with the recession that started the decade, followed by the horrible events in September, 2001, followed by the very slow recovery in high-yield demand, capped off by higher and higher and higher fuel prices until the recession at the end of the decade. And now, in the middle of the recession, oil prices are back in the low $80s/bbl, significantly higher than in the immediate aftermath of Hurricane Katrina in September, 2005.

 

[The Goose]

... snip
And now, in the middle of the recession, oil prices are back in the low $80s/bbl, significantly higher than in the immediate aftermath of Hurricane Katrina in September, 2005.

The higher dollar figure of oil's price isn't really impressive - oil is denominated by the dollar which has been subject to inflation, as evidenced by the price of gold and the relative steadiness of the Euro's value to gold.

The banking bailouts (started by Bush and finished by O'Bummer) seem to have increased the money supply and therefore, inflation has reared it's head since the increased dollar supply has dropped its value relative to gold and other currencies - ie, more dollars of less value to buy a given amount (1 ounce) of gold.

The Euro started out priced at about $.75 US and now that same Euro is worth approximately $1.40, meaning an almost 50% drop in the dollar's value since the Euro was officially introduced in the EU on 1 January 1999.

 

[eolesen]

Far be it from Arpey and Co. to be dishonest towards the investors and public, I guess they are above the corporate ethics pedestal.
Amazing how Arpey and Co. can do no wrong in your eyes, Eric.

Let me get this right... I'm openly agreeing with what Jamie Baker said, and that makes me a management apologist?...

BTW, I think I figured out your preference of Jamie Baker over Mike Boyd.....
From time to time, Boyd sides with the workers and that just plain out doesn't sit well with you.

That's because Mike Boyd and Bob Mann are paid consultants, and they shill for the people they consult for. Equity analysts like Baker and Chase aren't paid by the companies they follow. They get paid based on the accuracy of their predictions on a company's profitability. Before anyone goes making the argument that Wall Street analysts influence share prices, go re-read what I wrote. They get paid on predicting profit/loss. Wall Street doesn't influence profitability one iota.

 

[Hopeful]

Let me get this right... I'm openly agreeing with what Jamie Baker said, and that makes me a management apologist?...

Actually I was referring to this statement by you.....

"I can see the next theme emerging: Wall Street says AMR is in deep trouble, and employees will respond by saying the books are cooked, analysts are crooked, and the company can afford billions in raises and snapbacks on workrules.... "

 

[Bob Owens]

and the company can afford billions in raises and snapbacks on workrules....

Billions? The fact is that if AA just gave us back the $320 million they took, it would only put us even with SWA, they would still be saving over $300 million in maintenance labor costs compared to 2003(because they eliminated 4500 jobs) and they would probably generate more revenue and see costs related to delays and cancellations reduced dramatically. Increased productivity due to the morale boost would allow the company to continue to attrit down even more, and eliminate most of the OT like it did in 2001, which would cut their labor costs even more. Other workgroups would probably settle for parity with SWA as well if AA was reasonable at the table and some of them arent that far from SWA as it is, so the costs would not be that high, they would still be significantly lower than they were in 2003.

The fact is that AA's revenues have soared compared to 2003 and now we have nearly half as many workers. More revenue, less workers, just because they choose to spend all that extra money elsewhere (both from the extra revenue and fewer workers collecting checks) doesnt mean that we should accept their claim that they cant afford to pay us. Maybe they need to plead their case to those other entities that have jacked up their prices over the last seven years and absorbed all the airlines extra revenue. How much would they lose if AA shutdown? AA pays more for landing fees now than they did when we had 30% more landings.

 

[eolesen]

Actually I was referring to this statement by you.....

"I can see the next theme emerging: Wall Street says AMR is in deep trouble, and employees will respond by saying the books are cooked, analysts are crooked, and the company can afford billions in raises and snapbacks on workrules.... "

Well, Bob's post immediately above pretty much follows what I predicted, Hopeful.

I and a few others have been saying for a while that AMR's in a crappy financial position, their labor costs are out of line with the rest of the industry, and even with their revenue premium, it's not enough to offset the added increases y'all are asking for. Baker agrees.

That's not defending Arpey. It's essentially saying that status quo isn't working, and something radical has to change with regard to AMR's business model.

Firing the management team on it's own (as many here repeatedly suggest) might give you your pound of flesh, but it won't do a damn thing for addressing the fundamental issues with the cost structure disadvantage.

If the APA, TWU, and APFA agreed to sign the existing proposals on the sole condition that senior management resigns, that might have a small chance of working. Maybe Arpey would be willing to fall on his sword for the good of the company. Not so sure about the others, but hey, it's worth a chance. And it would be a hell of a PR stunt.

Maybe the more reasonable thing to do would be to have all three unions agree to sign Carrier X's contracts as long as officer pay and management bonuses are addressed... Let them keep financial performance incentives (not the PUP), but cap VP base pay to no more than 2x of the highest paid union worker.

It's radical, and it's actually a livable wage for the officers. Let them leave if it's not -- there are plenty of people willing to work for $150-300K per year as long as there's a potential for variable comp....

 

[Hopeful]

Believe it or not, I don't think a union contract should have a clause concerning executive pay. As i have said numerous times in the past, prior the concessions, I did not care one iota what an executive was paid, or anyone else for that matter

But the continual pay out of bonus/pup pay is getting more aggravating every April. They defend themselves by saying they are in the "median" range and how AA needs to compensate them because they don't want them to leave for a competitor.blah blah blah...
I can't tell you how many times an underpaid VP told an employee that if he didn't like it at AA, they he could quit.

AArogance at its best.

I say, "Let em go to the competition." That will teach the competitors a valuable lesson into hiring these people who are only there to fatten their wallets and purses.

Back to the topic...The company in dragging its feet because they don't want to give workers ANYTHING but have no shame or problem with paying themselves.
And no matter what form these payouts are, this company is the poster child for class warfare.

They continue to get shares of stock...but when I got my 449 shares of stock optioned at $5....It cost be $20,000.00 a year and it's still ongoing.

If the company wanted Walmart wages for its employees, they should have filed for bankruptcy and be done with us greedy "unionistas."

 

[TWU informer]

Firing the management team on it's own (as many here repeatedly suggest) might give you your pound of flesh, but it won't do a damn thing for addressing the fundamental issues with the cost structure disadvantage.

If the APA, TWU, and APFA agreed to sign the existing proposals on the sole condition that senior management resigns, that might have a small chance of working. Maybe Arpey would be willing to fall on his sword for the good of the company. Not so sure about the others, but hey, it's worth a chance. And it would be a hell of a PR stunt.

I say go file for Bankruptcy and Give us the Pound of Flesh.

We tried the concessions for Carty's head and that got us where we are today.

It is not just senior management either. Everyday, I watch as people that were "plugged into" open positions getting paid and cannot even begin to their jobs. This goes for upgraded union folks, management planners and staff assistants, to 1st leve Supervision, to HR Investigators.

We could agree to work for $10.00 per hour and in 4 years the incompetent leaders would be back asking for more. I am no longer going to subsidize the ignorance with my pay and benefits. All that happens with concessions is the other carrier's use our concessions against their own workforce for change in their cost structure, and then we are back to square one with a mis-managed airline and a cost disadvantage and a spiraling reverse of what once a good profession to work in.

We need someone that actually knows how to run the airline and dispense with the consultant hiring wannabe's.

We need someone that will look into how many people are being paid to do a job they are incapable of doing and either train them or fire them.

I feel certain a Bankruptcy Court is the only avenue to get our management to move in the required direction to make a difference. Workers giving up pay and benefits has not worked in the long run for the last 25+ years and I don't see that changing.

 

[JFK Fleet Service]

Bankruptcy would be a Pyrrhic victory for management, I don't see them going that route.

 

[FWAAA]

I say go file for Bankruptcy and Give us the Pound of Flesh.

We tried the concessions for Carty's head and that got us where we are today.

I learned early on to never allow emotions to color important decisions about money. Emotions are for love and family and friends. Warren Buffett didn't become one of the world's richest men by allowing his emotions to influence his investment decisions.

That said, I'm wondering whether evicting Carty was the right move in April, 2003. Sure, what he did was evil and underhanded; I even posted on this board in 2003 that delaying the filing of the 10-K (in hopes that the concessions would be a done deal before it was filed so as to hide the SERP and retention bonus plan from the workers) amounted to securities fraud.

Running Carty out on a rail might have been emotionally helpful for everyone, but has his ouster cost the company? IMO, he was a smarter airline person than Arpey will ever be. Arpey was handed $1.62 billion of annual concessions on May 1, 2003 and has spent seven years making excuses for his failure to right the ship. I understand and can accept some of the rationales, but some of his decisions have been, IMO, less than optimal. And some of the excuses are beginning to sound, well, like excuses.

Carty was hated for the deception, but had he stayed, AMR might have been better off. Could it have been any worse?

 

[Hopeful]

I
Carty was hated for the deception, but had he stayed, AMR might have been better off. Could it have been any worse?

I don't recall...Did he undo the SERPS?
If he did, maybe he would still be here.

I do give credit where credit is due. It was under Carty where we did get a decent contract and he did not immediately seek concessions following 9/11. It took almost a year and half before the concessions were force fed us.

 

[Bob Owens]

Well, Bob's post immediately above pretty much follows what I predicted, Hopeful.

I and a few others have been saying for a while that AMR's in a crappy financial position, their labor costs are out of line with the rest of the industry, and even with their revenue premium, it's not enough to offset the added increases y'all are asking for. Baker agrees.

That's not defending Arpey. It's essentially saying that status quo isn't working, and something radical has to change with regard to AMR's business model.

In reality I could care less what management makes, I only cite it because it exposes their hypocrisy.

AA's structure is different than the rest of the industry, so yes when it comes to labor a greater percentage goes towards labor, and a lower percentage goes towards paying vendors to accomplish tasks that labor is required to do to keep the airline running. It doesnt mean that that their labor costs are a problem, after all their unit costs are "in line" with the industry.

Like I've said many times before, AA has gone ahead with many costly mods and upgrades that were not required, sure over the long haul many of these things will help AA be more profitable in the future but they dont help AA show profits now which is what you and others choose to address. We have no reason to believe that when these things pay off that AA would be willing to make our sacrifice pay off and we have bills that are due now, our creditors could care less how good of an investment winglets, premium seats, larger OH bins, new airplanes, new Terminals etc are, neither do we, give me my money now and I'll choose where I want to invest it.

 

[FrequentFlierCA]

I don't understand how management has exhibited "hypocrisy" when the unions were fully aware of the PUP/PSP stuff in 2003, and even signed off on it. To top it off they rejected a similar deal for the unionized employees, probably because they didn't want a percentage of pay put at risk in the markets. I understand the griping; everyone gripes about those who make more (myself included). But where's the hypocrisy?