AMR says reviewing ownership of AAdvantage, American Eagle

[tail_twister]

You took 2+2 and got 5. The answer is not separation, the answer is integration.

The short term gain from selling an asset like AE will only go towards lining the pockets of Management while probably locking AA into a long term fee-for service agreement ala SABRE at above market rates.

Boomer, Take a look at the relationship between Continental and ExpressJet ala Continental Express. For years Continental pumped money into Express to feed their system. When things got tough, Continental spun Express off and started a fee for service arrangement. When they really examined the fleet demands hell Continental realized "hey we don't really have a need for 69 of these new Regional Jets so here ExpressJet we're not paying for them anymore you go do something with them". If you've taken notice to any of ExpressJets recent P/L statements you can see that they are hemorrhaging money. They lost almost 23 million this quarter while everybody else is making record profits. Continental is still getting their passengers at an industry rate without investing in a poorly run operation. American Eagle is no different than ExpressJet. It's poorly run, propped up by American Airlines and in need of a serious business management 101 lesson !! If AMR sold Eagle there would be a net positive effect for all. If Eagle started trying to jack the price up we'd just go to Republic and have them fly the routes. This business is operated by public demand for transportation and the fees they are willing to pay to get from point A to point B. The majors control the regionals, it's always been that way, it will never be any different. Why keep throwing money into an operation that can't tell the difference between their ass and their elbow. I say you can't sell it fast enough !! Put 'em out on their own and let them figure it out.

 

[WeAAsles]

Boomer, Take a look at the relationship between Continental and ExpressJet ala Continental Express. For years Continental pumped money into Express to feed their system. When things got tough, Continental spun Express off and started a fee for service arrangement. When they really examined the fleet demands hell Continental realized "hey we don't really have a need for 69 of these new Regional Jets so here ExpressJet we're not paying for them anymore you go do something with them". If you've taken notice to any of ExpressJets recent P/L statements you can see that they are hemorrhaging money. They lost almost 23 million this quarter while everybody else is making record profits. Continental is still getting their passengers at an industry rate without investing in a poorly run operation. American Eagle is no different than ExpressJet. It's poorly run, propped up by American Airlines and in need of a serious business management 101 lesson !! If AMR sold Eagle there would be a net positive effect for all. If Eagle started trying to jack the price up we'd just go to Republic and have them fly the routes. This business is operated by public demand for transportation and the fees they are willing to pay to get from point A to point B. The majors control the regionals, it's always been that way, it will never be any different. Why keep throwing money into an operation that can't tell the difference between their ass and their elbow. I say you can't sell it fast enough !! Put 'em out on their own and let them figure it out.

I'm not a fact and figure man but this is exactlly what I've heard when I,ve listened to the fact and figure people. I think right now AA needs to concentrate on there core product. If things get good again and they want to make investments than that can be looked at then.

 

[NewHampshire Black Bears]

There is a better chance, of a FUUKING republican winning the WH in 08', than AA selling A/E !

Eolesen is RIGHT.

("You GO...E")

 

[johnnyfleet]

Boomer, Take a look at the relationship between Continental and ExpressJet ala Continental Express. For years Continental pumped money into Express to feed their system. When things got tough, Continental spun Express off and started a fee for service arrangement. When they really examined the fleet demands hell Continental realized "hey we don't really have a need for 69 of these new Regional Jets so here ExpressJet we're not paying for them anymore you go do something with them". If you've taken notice to any of ExpressJets recent P/L statements you can see that they are hemorrhaging money. They lost almost 23 million this quarter while everybody else is making record profits. Continental is still getting their passengers at an industry rate without investing in a poorly run operation. American Eagle is no different than ExpressJet. It's poorly run, propped up by American Airlines and in need of a serious business management 101 lesson !!

You are actually incorrect Continental holds the leases on all of Express Jet's airplanes. They were going to take 69 and have Chautauqua fly them. Express Jet kept the planes and now fly 18 of them for Delta and the rest under their own name. The losses are due to start up costs and were expected. Express Jet is a well run operation and their PAWOBS, completion factor, and on time performance are equal to Continental. Chautauqua then started flying for CO with their own CRJ's and the performance is so bad that Continental is losing passengers and is considering dropping them as an express carrier. Continental still has the liability of those 69 planes and if Express Jet were to give up the lease Continental would have to take them back. You get what you pay for!

 

[eolesen]

Yep -- CO still is on the hook, and if you read between the lines, CO management isn't interested in getting them back because it's unlikely that another operator would want to pick them up. It's a similar situation to the FRJ's operated by ACA for DL a couple years back. When ACA became Indy, DL wound up having to take them back, ground them, and then dispose of the leases during their own bankrupcy.

It's likely that Comair will be on the auction block soon, and you'd think that there's not going to be a lot of people rushing to pick that franchise up. Unfortunately, there's never a shortage of people with deep pockets who dream of making it big in the airline industry... that goes for newby pilots, AMT's, and investors alike...

 

[Boomer]

Boomer, Take a look at the relationship between Continental and ExpressJet ala Continental Express. For years Continental pumped money into Express to feed their system. When things got tough, Continental spun Express off and started a fee for service arrangement. When they really examined the fleet demands hell Continental realized "hey we don't really have a need for 69 of these new Regional Jets so here ExpressJet we're not paying for them anymore you go do something with them". If you've taken notice to any of ExpressJets recent P/L statements you can see that they are hemorrhaging money. They lost almost 23 million this quarter while everybody else is making record profits. Continental is still getting their passengers at an industry rate without investing in a poorly run operation. American Eagle is no different than ExpressJet. It's poorly run, propped up by American Airlines and in need of a serious business management 101 lesson !! If AMR sold Eagle there would be a net positive effect for all. If Eagle started trying to jack the price up we'd just go to Republic and have them fly the routes. This business is operated by public demand for transportation and the fees they are willing to pay to get from point A to point B. The majors control the regionals, it's always been that way, it will never be any different. Why keep throwing money into an operation that can't tell the difference between their ass and their elbow. I say you can't sell it fast enough !! Put 'em out on their own and let them figure it out.

Twister,

Your relationship at CO has no comparison with the operation run by AMR with respect to AA and AE.

AA has mortgaged almost all but 140 something jets in thier fleet, AE owns almost all of their metal: AA owns almost all of their facilities which they subsidize on conveyance to AE.

Prior to the sale of SABRE, AA signed a multi year deal that inflated the value of SABRE far in excess of the costs of the contracts serviced by SABRE for AA. AE got almost all of those benefits for free. End Game: SABRE was priced and soled based on the value of the contract with AA and the freebee for AE included in the deal.

AE Unions are weak and pliable; they have the TWU for RAMP and MX with more and more of the work from AE being sent to our overhaul. If AA Overhaul is soo expensive; why is AE metal signing off on long term contracts for that work: it is because AA can perform the work cheaper than the regional OSV as opposed to a Legacy performing that same work.

AE was given the RDU hub for basically nothing so that they could establish the EA Shuttle operation based out of RDU and anchored in LGA for a price far below what US Airways could match. With the opening of the JFK terminal look for all of that flying to sway in accordance with the FAA threat to "rationalise" capacity into the NY area.

Operational costs subsidized by a continued growth in mainline revenue with the system network integrated for city pair opportunities no one else can match based on the operational cost for the segments flown: don't see the "synergies" you see.

 

[tail_twister]

You are actually incorrect Continental holds the leases on all of Express Jet's airplanes. They were going to take 69 and have Chautauqua fly them. Express Jet kept the planes and now fly 18 of them for Delta and the rest under their own name. The losses are due to start up costs and were expected. Express Jet is a well run operation and their PAWOBS, completion factor, and on time performance are equal to Continental. Chautauqua then started flying for CO with their own CRJ's and the performance is so bad that Continental is losing passengers and is considering dropping them as an express carrier. Continental still has the liability of those 69 planes and if Express Jet were to give up the lease Continental would have to take them back. You get what you pay for!

Yes you are correct Continental is on the hook for the 69 airplanes but if Express was such a well run operation why would there be a surplus of 69 airplanes ?? That's 3450 available seats daily ??? ExpressJet is so top heavy with extraodinary management salaries and excess management headcount that from a business perspective it's not very well run. Jim Ream makes more money than Arpey does !! Beyond that you're trying to tell me that when everybody has announced record profits for the quarter that Express's 23 million dollar loss was start up cost and in the plan ???? So if in fact times were lean these losses would have been exponentially larger.... correct ??? I'm not an accountant but if it looks like a fish and smells like a fish it's probably a fish. Smells fishy to me. Having intimate knowledge of the operation and the leadership I'm very confident with my opinions.

 

[tail_twister]

AA should sell off some of there investments to capitalize on there shareholder returns. If they concentrate more on there core product then we could have a much stronger airline. Although they have to maintain some control over how those assets are utilized by there new owners. Especially the AAdvantage program. Eagle doesn't really matter and should be sold. That way they can farm out to the lowest bidder for a commuter that would feed to the mainline product. If it's not Eagle than so be it. But it would be a great way for AA to purchase some of those 737 and possibly some 787's that they say they so desperatly need. I know that I refuse to subsidise those purchases on the backs of the money I gave up in 03!!!!!!!!!!!!!!

Here's some food for thought.......

UAL third-quarter profit up 75.8%; executives consider frequent-flier spinoff
Wednesday October 24, 2007
United Airlines parent UAL Corp. reported third-quarter net income of $334 million, up 75.8% from $190 million in the year-ago quarter, and said it will continue to maintain "discipline in capacity planning" as it implements a five-year strategic plan that focuses on its "core business" and contemplates selling off noncore businesses such as its Mileage Plus frequent-flier program.
"US airlines have consistently destroyed value," Chairman, President and CEO Glenn Tilton said. "We have to take a different approach. . .to break the historic boom-and-bust cycle of this industry." He said the company will be "looking at everything" in its portfolio to determine "what is core and what is not" to "unlock" the value of noncore businesses and enhance the performance and value of the core airline business to better position it for consolidation, which he said he considers a "strategic imperative."

While no decisions have been made, spinning off UA's frequent-flier program is under consideration, executives said. "Air Canada has done this, so that's helpful in thinking about the risks and to know that they were able to become comfortable with doing it," Executive VP and CFO Jake Brace said. He added that "getting a third party involved" in its maintenance business is also a possibility.

Executive VP and Chief Revenue Officer John Tague said UA is deviating from the US airline industry's "slavish belief in marginal economics" that causes carriers to increase capacity as demand rises, eroding pricing power. UA plans to continue slashing domestic capacity, with North America capacity to be lowered 4.5%-5.5% in the fourth quarter and 3%-4% for full-year 2008. "We believe prudent capacity planning is critical to deal with shocks, which are inevitable in this business, as expected rather than as exceptions," Tilton said.

Third-quarter revenue increased 6.8% to $5.53 billion while expenses rose just 0.6% to $4.87 billion, producing operating income of $656 million, up 95.8% over $335 million in the year-ago quarter. Mainline traffic dropped 0.3% to 30.95 billion RPMs on a 1.5% cut in capacity to 36.53 billion ASMs, producing a load factor of 84.7%, up 1.1 points. Mainline yield grew 9.1% to 13.73 cents as PRASM lifted 10.6% to 11.67 cents and RASM rose 8.4% to 12.87 cents. Mainline CASM was up 1.3% to 11.28 cents. CASM excluding fuel and UAFC increased 6.1% to 7.65 cents.


by Aaron Karp

 

[will fix for food]

Twister,

Your relationship at CO has no comparison with the operation run by AMR with respect to AA and AE.

AA has mortgaged almost all but 140 something jets in thier fleet, AE owns almost all of their metal: AA owns almost all of their facilities which they subsidize on conveyance to AE.

Eagle also mortgaged the fleet. They recently paid off some of the CRJ's. I believe the vast majority of everyting else is still collatoral.

A/A (AMR?) does own the facilities but charges Eagle rent. It's true. Eagle doesn't get anything for free.

Prior to the sale of SABRE, AA signed a multi year deal that inflated the value of SABRE far in excess of the costs of the contracts serviced by SABRE for AA. AE got almost all of those benefits for free. End Game: SABRE was priced and soled based on the value of the contract with AA and the freebee for AE included in the deal.

AE Unions are weak and pliable; they have the TWU for RAMP and MX with more and more of the work from AE being sent to our overhaul. If AA Overhaul is soo expensive; why is AE metal signing off on long term contracts for that work: it is because AA can perform the work cheaper than the regional OSV as opposed to a Legacy performing that same work.

ABI and MQT were swamped and couldn't keep up with the work. I guess they deemed it cheaper to pay A/A mechanics within AMR than to give the money to someone outside the company who may or may not have the available dock space. It's all just Arpey bucks. As an Eagle mechanic I think they did the right thing. I would rather see you guys being recalled that see the work go to some bozos.

AE was given the RDU hub for basically nothing so that they could establish the EA Shuttle operation based out of RDU and anchored in LGA for a price far below what US Airways could match. With the opening of the JFK terminal look for all of that flying to sway in accordance with the FAA threat to "rationalise" capacity into the NY area.

Operational costs subsidized by a continued growth in mainline revenue with the system network integrated for city pair opportunities no one else can match based on the operational cost for the segments flown: don't see the "synergies" you see.

 

[will fix for food]

Boomer, Take a look at the relationship between Continental and ExpressJet ala Continental Express. For years Continental pumped money into Express to feed their system. When things got tough, Continental spun Express off and started a fee for service arrangement. When they really examined the fleet demands hell Continental realized "hey we don't really have a need for 69 of these new Regional Jets so here ExpressJet we're not paying for them anymore you go do something with them". If you've taken notice to any of ExpressJets recent P/L statements you can see that they are hemorrhaging money. They lost almost 23 million this quarter while everybody else is making record profits. Continental is still getting their passengers at an industry rate without investing in a poorly run operation.

American Eagle is no different than ExpressJet. It's poorly run, propped up by American Airlines and in need of a serious business management 101 lesson !!

Eagle is run by American Airlines executives. All their badges say A/A. The business decisions are made by the BOD. American and Eagle trade execs so fast it will make your head spin. So how is it that the same people are idiots at running an RJ operation but are geniuses at running a mainline operation?

If AMR sold Eagle there would be a net positive effect for all. If Eagle started trying to jack the price up we'd just go to Republic and have them fly the routes. This business is operated by public demand for transportation and the fees they are willing to pay to get from point A to point B. The majors control the regionals, it's always been that way, it will never be any different. Why keep throwing money into an operation that can't tell the difference between their ass and their elbow. I say you can't sell it fast enough !! Put 'em out on their own and let them figure it out.

Republic doesn't have the planes or the pilots to absorb Eagle's flying. Nobody does. If you don't know about regional pilot staffing issues at all the airlines do a little research. It's interesting.

BTW, Eagle changed the way it charges A/A for feed. From Eagle's President:

We accomplished one of the major goals of our Plan to Win during the third
quarter – moving to a market-based pricing agreement with American. For the
past several years we have established the price to AA by budgeting all of our
anticipated expenses and then adding an amount on top equal to the profit
margin we believed was competitive.
Under the new agreement, Eagle charges AA a rate for our flying and for ground
handling services which is equal to the rates other regional carriers charge their
mainline partners. The good news about this new agreement is that both Eagle
and AA know that we are charging market competitive prices and AA is receiving
good value from our services. To match the market, we had to cut our price to
AA by approximately 2%, and this will reduce our margin significantly. Although
we should still be profitable at these lower prices, it makes it even more important
that we continue to find ways of operating more efficiently.

Of course if you want to look at it from an AMR perspective, Eagle feed is free. Do you think TSA will match that?

 

[Boomer]

EDITED for address correction: Boomer
Will fix for food:
xxxxxxx,
Use the quote button at the end of a post to which you choose to reply; then hit the "Add Reply" button at the end of the page for the thread to which you wish to add your reply. It will make my reply to your post much easier.

 

[Boomer]

EDITED for address correction: Boomer
Will fix for food,
XXXXXXX,
Below is the entire cut-n-paste for my post and your reply: please advise to portions that may be innaccurate.

QUOTE(Boomer @ Oct 23 2007, 11:39 PM)
Twister,

Your relationship at CO has no comparison with the operation run by AMR with respect to AA and AE.

AA has mortgaged almost all but 140 something jets in thier fleet, AE owns almost all of their metal: AA owns almost all of their facilities which they subsidize on conveyance to AE.

Eagle also mortgaged the fleet. They recently paid off some of the CRJ's. I believe the vast majority of everyting else is still collatoral.

A/A (AMR?) does own the facilities but charges Eagle rent. It's true. Eagle doesn't get anything for free.

Prior to the sale of SABRE, AA signed a multi year deal that inflated the value of SABRE far in excess of the costs of the contracts serviced by SABRE for AA. AE got almost all of those benefits for free. End Game: SABRE was priced and soled based on the value of the contract with AA and the freebee for AE included in the deal.

AE Unions are weak and pliable; they have the TWU for RAMP and MX with more and more of the work from AE being sent to our overhaul. If AA Overhaul is soo expensive; why is AE metal signing off on long term contracts for that work: it is because AA can perform the work cheaper than the regional OSV as opposed to a Legacy performing that same work.

ABI and MQT were swamped and couldn't keep up with the work. I guess they deemed it cheaper to pay A/A mechanics within AMR than to give the money to someone outside the company who may or may not have the available dock space. It's all just Arpey bucks. As an Eagle mechanic I think they did the right thing. I would rather see you guys being recalled that see the work go to some bozos.

AE was given the RDU hub for basically nothing so that they could establish the EA Shuttle operation based out of RDU and anchored in LGA for a price far below what US Airways could match. With the opening of the JFK terminal look for all of that flying to sway in accordance with the FAA threat to "rationalise" capacity into the NY area.

Operational costs subsidized by a continued growth in mainline revenue with the system network integrated for city pair opportunities no one else can match based on the operational cost for the segments flown: don't see the "synergies" you see.
--------------------------------------------------------------------------------------------------------------------------

Will fix for food,
XXXXXXX:
Eagle also mortgaged the fleet. They recently paid off some of the CRJ's. I believe the vast majority of everyting else is still collatoral.

A/A (AMR?) does own the facilities but charges Eagle rent. It's true. Eagle doesn't get anything for free.

Boomer:
AMR 2006 Annual Report
Per the 2006 Annual report, page 22 0f 113, entry: AE owns 284 aircraft and leases 22. Unless there has been a "material" change in the last 10 months that was overlooked in the Quarterly filings, AE owns their metal. Given that report, I was incorrect in stating the numbers for AA owned versuses leased...it looks like 398 owned versuses 298 leased.

My experience as a Station Chair indicates otherwise: men that I represented were regularly called to service AE exclusive operational areas with labor and materials costs. AA management was asked to bid for those services but the bid was rejected as "too expensive" but they were regularly detailed to continue the same jobs even though AA management told the mechanics that there would never be a bill paid by AE for services rendered and there was never a work order signed for the labor hours or the materials used.



Will fix for food,
XXXXXXX,
ABI and MQT were swamped and couldn't keep up with the work. I guess they deemed it cheaper to pay A/A mechanics within AMR than to give the money to someone outside the company who may or may not have the available dock space. It's all just Arpey bucks. As an Eagle mechanic I think they did the right thing. I would rather see you guys being recalled that see the work go to some bozos.

Boomer:
I guess AMR, AA and AE are attempting the same scenario accomlished at SABRE by locking AE into above market rate contracts in the "pump and dump" scheme if they are placing work with overhaul that could be accomplished cheaper elsewhere.

 

[will fix for food]

Boomer,

A little deeper in the report it talks about Eagle borrowing 300 million against the planes. I'll cut and paste it later when I have more time.

 

[FWAAA]

AMR 2006 Annual Report
Per the 2006 Annual report, page 22 0f 113, entry: AE owns 284 aircraft and leases 22. Unless there has been a "material" change in the last 10 months that was overlooked in the Quarterly filings, AE owns their metal. Given that report, I was incorrect in stating the numbers for AA owned versuses leased...it looks like 398 owned versuses 298 leased.

"Owned" doesn't mean "free and clear" of debt and liens. It merely means they're not leased. They're owned the way most people "own" their new car: the bank loaned most of the purchase price and kept the title. AA paid cash for many of its 1999-2001 new 738s and 777s but then borrowed billions during 2001-02, granting liens against those airplanes. Recently, AMR has begun paying down that debt.

As indicated at the bottom of p18 of the 2006 AMR 10-K:

very large majority of the Company’s owned aircraft are encumbered by liens granted in connection with financing transactions entered into by the Company.

That's what secures much of the billions of long-term secured debt issued by AMR during the 2001-02 financial spiral.

At the bottom of p64, AMR said the following about Eagle's debt:

As of December 31, 2006, AMR has issued guarantees covering approximately $1.7 billion of American’s tax-exempt bond debt and American has issued guarantees covering approximately $1.1 billion of AMR’s unsecured debt. In addition, as of December 31, 2006, AMR and American have issued guarantees covering approximately $388 million of AMR Eagle’s secured debt, and AMR has issued guarantees covering an additional $2.6 billion of AMR Eagle’s secured debt.

http://www.shareholder.com/aa/EdgarDetail....8&SID=07-00

That's $3 billion of debt on those Eagle RJs, some of which was paid off in the third quarter of this year.

 

[Boomer]

Boomer,

A little deeper in the report it talks about Eagle borrowing 300 million against the planes. I'll cut and paste it later when I have more time.

"Owned" doesn't mean "free and clear" of debt and liens. It merely means they're not leased. They're owned the way most people "own" their new car: the bank loaned most of the purchase price and kept the title. AA paid cash for many of its 1999-2001 new 738s and 777s but then borrowed billions during 2001-02, granting liens against those airplanes. Recently, AMR has begun paying down that debt.

As indicated at the bottom of p18 of the 2006 AMR 10-K:
That's what secures much of the billions of long-term secured debt issued by AMR during the 2001-02 financial spiral.

At the bottom of p64, AMR said the following about Eagle's debt:
http://www.shareholder.com/aa/EdgarDetail....8&SID=07-00

That's $3 billion of debt on those Eagle RJs, some of which was paid off in the third quarter of this year.

WFFF, FWAA;

Noted, I don't have time to dig into the reports but still stand by the facilities statements with resepct to issues I was involved in during my two terms a Station Chairman and the grievances that resulted as a byproduct of AA not being paid for services rendered from AA to AE.