Analyst expects AMR to lose over $1 billion in 2011

[WorldTraveler]

aw yes... if you don't like the message, shoot the messenger.

I'd have thought you were smart enough to have learned by now that strategy doesn't work - and reality is just as real the next morning anyway.


The issue w/ DL is simply that it is an airline that has succeeded where AA has not. DL faced problems which were far larger than AA's but managed to successfully restructure. That is the issue here. We could have talked about AA vs. CO 5 years ago with the same equation.... the difference was that CO went through a far more gut-wrenching restructuring that resulted in much of what once was CO thrown overboard. DL is the best proxy of an airline that has made a dramatic turnaround and COULD serve as an example of what AA COULD do - if people like you would live in the land of reality instead of denial and fantasy.

I actually do care quite a bit about AA and am interested in seeing the company turned around. The fact that people like you can't seem to get a grip on reality and continue to live in some dream world is what scares me.

I write because despite whether you like what I say or not, there are people who do send me PMs telling me that I do provide valuable insights into the industry - including AA. When those comments stop coming in, I'll hang it up.

For the near-term future, it appears that everything I have said about AA's inability to restructure itself could well come to a head in the next 12-18 months.

 

[eolesen]

This is the AA forum, and there are 53 mentions of AA and 47 mentions of DL in this thread?

WT, I know it is impossible to believe, but people here aren't afraid of the truth. They're just sick & tired of constantly being told daily how DL needs to be the benchmark.

I've got news for you... DL isn't anyone's benchmark on costs. That honor goes to WN, and the low cost guys like B6 and even G4.

 

[Hopeful]

This is the AA forum, and there are 53 mentions of AA and 47 mentions of DL in this thread?

WT, I know it is impossible to believe, but people here aren't afraid of the truth. They're just sick & tired of constantly being told daily how DL needs to be the benchmark.

I've got news for you... DL isn't anyone's benchmark on costs. That honor goes to WN, and the low cost guys like B6 and even G4.

I must say, well put, Eric!
The problem I have is when one company, and I mean a company in any industry or business, compares itself to another.
Every firm is unique in structure and operation even doing the same business.
The cost-comparison factor is widely used when looking to cut labor costs.
As for B6, they aren't making profits as in the early years. Even WN has felt the pinch of economic and fuel factors..

No company or person is identical and equal to another!

 

[jersey777]

This is the AA forum, and there are 53 mentions of AA and 47 mentions of DL in this thread?

WT, I know it is impossible to believe, but people here aren't afraid of the truth. They're just sick & tired of constantly being told daily how DL needs to be the benchmark.

I've got news for you... DL isn't anyone's benchmark on costs. That honor goes to WN, and the low cost guys like B6 and even G4.

The bottom line is that Delta made money last year and will make money this year. We can't say the same thing here at AA. They are obviously doing something right and we are not. If the analysts are correct, then Delta will have income of 2 billion over American. There is a lot more going on here then labor costs. At some point, the board of directors needs to do something. The excuses are running short and this team of managers has lost my confidence.

 

[WorldTraveler]

The simple fact is that companies in an industry can be and are compared to each other on a daily basis - it is the essence of what happens as part of the process of being a publicly traded company. AMR and AA as its principal subsidiary are required to report a wealth of information to the SEC as a regulator of publicly traded companies and to the DOT as a US airline. There is a great deal of information that demonstrates quite well how AA and every other airline compares to its peers. Trying to pretend that AA/AMR can't be compared to its peers because it is unique flies in the face of the entire structure of publicly traded companies worldwide. If AA doesn't want to be compared to other companies, it could be taken private and alot of this information need not be reported.

AA, DL, UA, and US are peers to each other as legacy network US airlines. WN and every other low fare airline are in a different market group and anyone who has any knowledge of the industry knows what airlines are grouped with each other for the purposes of financial comparison. Despite what US would like to think, they are not a low fare or low cost airline and they are a network airline. The fact that DL has lower costs than US highlights that US/LCC's categorization of itself in the industry was incorrect then and remains incorrect now.

Every airline as with every company is unique but unless AMR/AA dramatically reshapes itself in bankruptcy and guts itself of its legacy past (including most of its legacy employees), it will be grouped as a network, legacy airline with DL, UA, and US as its peers in the USA and financial and market comparisons will be made on that basis.

Once again, the cold hard reality is that every other US network airline turned themselves around in the past decade (2000-2009) except for AA. UA spent longer and more money in BK than any other US airline in history but they have achieved stability and even with their cost increases - which will accelerate with the CO merger, they are very well prepared to compete in the years ahead. UA and CO both have industry average productivity compared to their network peers and an industry leading pile of cash that will serve them well during their transition.
US took two trips through BK and their people paid a dear price for it but US is stable, acknowleding that it has a suboptimal network from the perspective of revenue generation compared to its network peers.
Once again, the reason why DL is noteworthy is because it completed the fastest, most dramatic turnaround in the history of US aviation, going from being the largest domestic US airline to the largest US int'l airline based on RPMs and that was before the NW merger. DL also brought its costs back down to the industry leading position it had for years as a pre-deregulation era airline. DL is investing heavily in its product and is well on its way to surpassing the level of amenities that CO once offered and which are being stripped away or not matched by UA. And specific to the labor discussions that are a key part of this forum, despite acquiring one of the most heavily unionized US airlines with one of the most contentious labor-mgmt relations, DL has succeeded (pending completion of final procedures) in maintaining its status as one of the least unionized large airlines in the world.

In the 1995-2005 period, CO achieved many of the same things DL has in the past few years - overtaking much of DL's historical success in these areas. The fact that DL is now receiving some of the same accolades that CO once did demonstrates that it isn't just me that thinks DL is doing well.

The point is not whether it is CO or DL that is used as a basis for comparison. The point is that there are solidly performing, well-run companies in any sector of any industry that can be used as best performing examples for others. DL was not afraid to acknowledge in its reorganization that it had lost many of its historical strengths and that it needed to copy the successes of some of its competitors; DL's current network management executive was key in helping CO build its current network which is highly focused on premium revenue, for instance. It isn't a surprise that despite CO's lower average labor costs than DL, DL obtained margins comparable to or superior to CO because DL figured out how to tap the revenue generating potential of DL's network.

I have never said that AA/AMR's problem is either labor or management specific. It is clearly the responsibility of both. But it is also abundantly clear that AA's employees will pay the highest price if AA fails to restructure itself outside of BK because history clearly shows that airline employees fare far worse in BK.

When you're bleeding, you ask for help and are willing to admit when your first aid efforts have not worked and you seek the advice of people who will tell you the cold, hard facts even if you don't like what you hear.

But without exception, if you refuse to acknowledge that you have a problem or refuse to do what is necessary to fix the problem, the bleeding will stop because it always does.

The alternative is to treat the wound and stop the bleeding and allow the organism to heal on its own. I have enough interest in AA/AMR to see that happen rather than have another US airline go through a gut-wrenching reorganization in BK.

 

[Hopeful]

The alternative is to treat the wound and stop the bleeding and allow the organism to heal on its own. I have enough interest in AA/AMR to see that happen rather than have another US airline go through a gut-wrenching reorganization in BK.

You could care less what happens to employees. You are blaming labor costs for the ills of AA. How about looking at management?
Can they do no wrong according to you?

Oh, right, you believe that they did wrong by NOT declaring bankruptcy.
please spare us the "LET'S WORK TOGETHER AND HEAL FROM WITHING RATHER THAN GO THROUGH THE GUT WRENCHING RE-ORGANIZATION PROCESS OF BANKRUPTCY."

We gave this company BILLIONS over the past 8 years and they still cannot make a difference.
Maybe it's time to replace the manager and GM of this team rather than all the players!

As is said on this forum from time to time, AA does need a negative cash on hand position to declare bankruptcy.
Let them file already and be done with it.
Just remember, bankruptcy does NOT decertify unions, so I will still be here. And they may force me to come to work, but they cannot stop me from going by the book and ultimately affecting AA's performance.
That is my right to affect big shot holier than thou travel platinum members like yourself who will vow to fly Delta!

 

[WorldTraveler]

You could care less what happens to employees. You are blaming labor costs for the ills of AA. How about looking at management?
Can they do no wrong according to you?

As is said on this forum from time to time, AA does need a negative cash on hand position to declare bankruptcy.
Let them file already and be done with it.
Just remember, bankruptcy does NOT decertify unions, so I will still be here. And they may force me to come to work, but they cannot stop me from going by the book and ultimately affecting AA's performance.
That is my right to affect big shot holier than thou travel platinum members like yourself who will vow to fly Delta!

how about you read what I wrote?

I didn't say that unions are the problem... I said it is up to those unions as representatives of AA's employees to work to find solutions to AA's grave problems.
WN is heavily unionized just like AA is and NW was.... but WN has outstanding labor relations by comparison and the unions work w/ the employees to ensure everyone's success. Unions among traditional network airlines have rarely worked that way.... but I will say that the only way that AA will turn around is if the unions start to act that way. DL wasn't willing to take that risk and instead succeeded at retaining its traditional non-union status outside of the cockpit and dispatchers among large operational groups.
Whether AA is unionized or not isn't the issue.. the issue is who wins in all of this. The current AA course is headed for a laundry list of losers that looks no different than EA or TW.

If you wish to burn down the house in spite, who do you think will win?

I have never said that AA/AMR's problem is either labor or management specific. It is clearly the responsibility of both. But it is also abundantly clear that AA's employees will pay the highest price if AA fails to restructure itself outside of BK because history clearly shows that airline employees fare far worse in BK.

BTW, I flew on an AC 773ER a couple weeks ago - DL doesn't get all of my business. It will be very nice to see the 773ER in AA's fleet; it should provide AA with a lot of network flexibility and should provide significant cost benefits for AA.

 

[Hopeful]

how about you read what I wrote?

I didn't say that unions are the problem... I said it is up to those unions as representatives of AA's employees to work to find solutions to AA's grave problems.
WN is heavily unionized just like AA is and NW was.... but WN has outstanding labor relations by comparison and the unions work w/ the employees to ensure everyone's success. Unions among traditional network airlines have rarely worked that way.... but I will say that the only way that AA will turn around is if the unions start to act that way. DL wasn't willing to take that risk and instead succeeded at retaining its traditional non-union status outside of the cockpit and dispatchers among large operational groups.
Whether AA is unionized or not isn't the issue.. the issue is who wins in all of this. The current AA course is headed for a laundry list of losers that looks no different than EA or TW.

If you wish to burn down the house in spite, who do you think will win?

WT, if you knew the history of unions at AA, namely the TWU, you will see that the TWU is a company union. They have virtually given the company almost everything the the company ever desired. Starting in 1983, the TWU GAVE to the company industry leading concessionary contracts. Not always in dollar value, but work rules the company said they needed. And it is because of those profound contracts that AA did grow and became profitable for many a year.

How much more do you want us to give?
If the company wants the cost structure of DL then COME OUT AND PUT THE OFFER ON THE TABLE!
They have been dragging their feet for 3 and half years after having enjoyed billions in cost savings starting 2003.
Instead of advising the unions to work with the company, please advise the company.
Having been in this business for nearly 4 decades, I can tell you from experience, the comapny IS NOT ALWAYS RIGHT contrary to conventional wisdom.

 

[WorldTraveler]

I never said the company is right even half of the time; unions have no control over AA's network, marketing, aircraft, or product decisions - yet AA has made decisions in the recent past that has seriously eroded their ability to compete. I have never blamed AA's unions for AA continuing to operate the highest cost in the US industry 762, AA's decision to pull out of key NYC-Florida markets and then sign codeshare agreements with the key airline that ran AA out of those markets, its unwillingness to upgrade its int'l fleet with nose to tail AVOD which is the industry standard now.....

You as presumably a TWU member should dump them and get someone else in there that will represent you AND do what is necessary to ensure that you AND the company both win. WN's unions have figured out how to do that and DL is creating win-win situations for its employees irrespective of their union status.

Is the TWU or any other union willing to get rid of thousands of employees in order to get AA's productivity up to industry standard levels AND allow you (or AA's current employees) to not have to endure further pay cuts - or will they continue with keeping as many people on the payroll as possible which will mean that the money that AA can spend on salaries and benefits (which are becoming more and more costly) will have to be spread among many more people than is necessary?

 

[eolesen]

Nobody questions the need for industry comparisons, WT.

When you're talking to the family of someone sitting in the ICU, they really don't want to hear about how your wonderful little Bobby has been doing since his own accident four or five years ago.

I don't think you're really sincere at all about AMR's recovery. It's more like you know little Bobby needs a kidney & a liver, and AA has the same blood type...

 

[Hopeful]

I never said the company is right even half of the time; unions have no control over AA's network, marketing, aircraft, or product decisions - yet AA has made decisions in the recent past that has seriously eroded their ability to compete. I have never blamed AA's unions for AA continuing to operate the highest cost in the US industry 762, AA's decision to pull out of key NYC-Florida markets and then sign codeshare agreements with the key airline that ran AA out of those markets, its unwillingness to upgrade its int'l fleet with nose to tail AVOD which is the industry standard now.....

You as presumably a TWU member should dump them and get someone else in there that will represent you AND do what is necessary to ensure that you AND the company both win. WN's unions have figured out how to do that and DL is creating win-win situations for its employees irrespective of their union status.

Is the TWU or any other union willing to get rid of thousands of employees in order to get AA's productivity up to industry standard levels AND allow you (or AA's current employees) to not have to endure further pay cuts - or will they continue with keeping as many people on the payroll as possible which will mean that the money that AA can spend on salaries and benefits (which are becoming more and more costly) will have to be spread among many more people than is necessary?

We should have laid people off in 2003 rather than succumb to concessions... I know that sounds selfish, but the end result is those laid off folks would have been recalled sooner rather than later as AA expanded and became profitable because of the layoffs. And they would have been recalled to better compensation and benefits rather than living under the current concessionary force fed contract in which the company wants to take more from.
Now, is AA willing to slash their management and and non-union staff?

And as for your blaming or not blaming labor, you do have a subtle way of injecting labor into AA's ability to compete with other carriers. Any way you slice it, it is still pointing the finger at labor.

 

[eolesen]

Now, is AA willing to slash their management and and non-union staff?

I think they already do, Hopeful. AA's agent staffing is already bare bones, and cutting management staffing at HDQ is always going on. Every November, they cut managers & analysts. It's like clockwork. Can't speak to supervisory staff in the airports, but my impression has always been that they're understaffed there with respect to the peers as well.

The biggest issue that separates AA from its peers is the massive staffing in TUL. Not trying to drive a wedge there, but it's a fact. The other guys amputated their maintenance operations (or never had them in the case of WN and contemporary CO), and since AA's different from everyone else, it therefore must be a problem...

 

[FWAAA]

Nobody questions the need for industry comparisons, WT.

When you're talking to the family of someone sitting in the ICU, they really don't want to hear about how your wonderful little Bobby has been doing since his own accident four or five years ago.

I don't think you're really sincere at all about AMR's recovery. It's more like you know little Bobby needs a kidney & a liver, and AA has the same blood type...

Post of the day!

It's possible that WT doesn't intend to come across that way, but I agree that it sound that way.

 

[jersey777]

Post of the day!

It's possible that WT doesn't intend to come across that way, but I agree that it sound that way.

I think that WT has, perhaps, more insight and knowledge then those who are cheerleaders and defenders of the decision makers of American Airlines. The difference is that WT is defending the strategies of a money making operation while you guys are defending a consistent money losing airline.

 

[wcs]

The biggest issue that separates AA from its peers is the massive staffing in TUL. Not trying to drive a wedge there, but it's a fact. The other guys amputated their maintenance operations (or never had them in the case of WN and contemporary CO), and since AA's different from everyone else, it therefore must be a problem...

What you're saying isn't exactly true. The other carriers have maintenance operations but the workers aren't their employees and they don't own the facilities. The cost appears differently on the bottom line. In some circumstances, when you don't need them, it's less. But not always.
Let's make this comparison. You have a business and you rent office space and use temps. You don't have your own building and staff.
That saves money, right? You don't have that problem of that cost.
Now there's a circumstance that requires large meeting space and more staff.
A potential upturn in your business. A problem with your largest client.
But you run all over town and the temp agencies have everyone hired out. The meeting space is booked. A circumstance becomes a massive headache. If only you had invested in the employees and facilities. You would control how your problem is resolved. Not someone who farms out employees and facilities to your competitors. As a result of a lack of resources you lose out on potential business.
The question is what is TUL (and AFW); a massive cost or a massive investment? The difference between it being a cost or an investment is the eventual return.
The AA managment has answered that question. Since they have kept the maintenance operation in-house it's a good investment. Over the years they've sold what was considered poor investments. Flagship hotels, SkyChefs, Combs, SABRE and now they're considering Eagle.
In another forum there's the discussion about a WN jet sitting damaged for two months waiting for Boeing to work on it. If WN had in-house staff and facilities how much faster would that aircraft been returned to service? How much revenue would be earned with that jet in service sooner? How much more is the cost of repair by using Boeing? How much would such an investment returned to WN?