Analyst expects AMR to lose over $1 billion in 2011

[WorldTraveler]

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.

very astute and accurate.
If I were simply pointing out AA's failings or successes (whether from a labor or mgmt standpoint), I would be alot like FWAAA who understands the industry but doesn't provide a comparison.

My sole reason in mentioning DL is to provide an example of a company that by nearly all counts went through the same crisis as AA and managed to emerge from it. We can also cite CO but the environment and circumstances around its turnaround are not the same as AA or DL's. UA provides some basis for comparison but I think most people would not attempt to argue at this point that UA has bested DL in the degree of its turnaround and merger; it might happen in time if the CO merger is done right and....
We could also cite WN but they aren't a legacy airline in the sense that either AA, DL, or CO is and they operate an entirely different business model.
So, the sole reason for comparison DL and AA is because they are peers and DL figured out how to overcome its difficulties.

No one, and I mean no one, is qualified to assess the degree to which I want to see AA and its employees turn things around.

 

[Kev3188]

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.

I think in the end it comes down to what kind of workforce the employees want AA to be. Do they want 10 guys making $20/hr., or 20 making $10?

 

[Frank Szabo]

I think in the end it comes down to what kind of workforce the employees want AA to be. Do they want 10 guys making $20/hr., or 20 making $10?

The TWU would prefer 20 paying dues instead of 10 - that's why we're where we are now.

 

[AANOTOK]

The TWU would prefer 20 paying dues instead of 10 - that's why we're where we are now.

Bingo!

 

[eolesen]

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?

From what Bob was saying, it's not a matter of waiting for an AOG team to be available, but more of a matter of needing parts to be fabricated.

Either way, if WN had a huge overhaul complex at HOU or DAL, it wouldn't do much good for the airplane in PHL. Maybe a structures shop could fabricate the parts, but I don't think you can just pick up the phone and order a couple of stringers like you would an order of fried rice & egg rolls... And I also don't think WN is in any great hurry to put it back in the air. It wouldn't surprise me if they had insurance covering the cost of out-of-service time.

How much to own vs. lease is a balancing act that every business faces.

If you buy the facilities, you are often stuck with them when business falls off.

How long did DL continue to pay rent on Terminal E (4E) at DFW? Or the DWH hangar? Or the cargo sorting facility? How about all the empty concourse space at CVG when they cut that hub back? And now with the cuts at MEM, I suspect DL is signatory on the facility lease, not the regionals.

Yes, there is always the risk when contracting out for space and/or services that there won't be room at the inn.

With airplanes, it's pretty well known what the recurring workload is going to be.

The AA managment has answered that question. Since they have kept the maintenance operation in-house it's a good investment.

You, Bob & others say AA has decided to keep TUL because it's cheaper and a good investment. But nobody really knows for sure if that's really the case. AMR is holding the cost cards close to the vest, and it's still not clear to me that there is flexibility in the current contract to allow them to do a wholesale outsourcing of overhaul. Another possible issue is the environmental issues. We've already seen where MCI had ground contamination issues. IIRC, CO had the same ground contamination abatement/liability issues when they closed down ELP maintenance in one of its bankruptcies. It wouldn't surprise me to see that UA's SFO facilities and the former NWA facilities have similar issues. (DL could not have any environmental issues because like Obama, they are one step removed from sainthood).

It's probably safe to say there is no one facility that could take on all of AA's overhaul, but if a sublease on the TULE facility came along with a 5-10 year contract to retain work, someone like Timco or STAero would probably consider taking the work and the lease/sub-lease if the environmental liability were also addressed.

 

[wcs]

With airplanes, it's pretty well known what the recurring workload is going to be.

That's a distortion about the scenario I gave earlier. If aircraft were like new cars that only required an oil change every 3000 miles then that would be true.
But with the complex environment in which aircraft operate there are issues that come up outside of recurring workload. Well known recurring workload is some thing that can be budgeted for. Keeping aircraft available to operate a scheduled airline is something that requires investment.
Premature divestiture of the MCI investment before DWH was ready will end up costing AA. There will be those B757s sitting around in TUL without someone to accomplish the checks. The company's hiring of (investment in) over 600 AMTs because of a short-sighted management is an admission of lack of investment.
Retention of TUL and AFW are admissions of a good investment.
Outside of the industry-wide stories of the poor quality control at outsourced MRO facilities, I can't comment on how this works for other carriers. They hold the cards close to the vest also.

 

[eolesen]

Most of the stories about poor quality I see coming from union workers in the US, so consider the source with a grain (or jar) of salt.

In 25 years, I've never heard anyone at LH, CX, or BA complaining about the quality of their outsourced MRO work.

Maybe we have higher safety standards than the rest of the world, but there's no real evidence that planes are falling out of the sky on any other continent. So I stack some of this up to the belief that only a US union worker employed by an airline is capable of performing high quality work. I say that's hogwash. Quality is possible anywhere as long as you demand it and oversee it.

 

[SRQRoadWarrior]

very astute and accurate.
If I were simply pointing out AA's failings or successes (whether from a labor or mgmt standpoint), I would be alot like FWAAA who understands the industry but doesn't provide a comparison.

My sole reason in mentioning DL is to provide an example of a company that by nearly all counts went through the same crisis as AA and managed to emerge from it. We can also cite CO but the environment and circumstances around its turnaround are not the same as AA or DL's. UA provides some basis for comparison but I think most people would not attempt to argue at this point that UA has bested DL in the degree of its turnaround and merger; it might happen in time if the CO merger is done right and....
We could also cite WN but they aren't a legacy airline in the sense that either AA, DL, or CO is and they operate an entirely different business model.
So, the sole reason for comparison DL and AA is because they are peers and DL figured out how to overcome its difficulties.

No one, and I mean no one, is qualified to assess the degree to which I want to see AA and its employees turn things around.

 

[SRQRoadWarrior]

Ladies and Gentleman,

As I have mentioned before, WT is THEE reason I started reading these forums. I started following him when he was talking about why the Delta/USAir merger was not going to ever happen, on that other board, and he for the most part was 95% right on. Go look at the history of the other sites. You will see it.

What is happening at AMR is not pretty. But WT does have a positive following for a key reason. Sorry if you do not always agree with him, but look at his past posting on various boards. He is pretty much on the mark.

 

[Hopeful]

Ladies and Gentleman,

As I have mentioned before, WT is THEE reason I started reading these forums. I started following him when he was talking about why the Delta/USAir merger was not going to ever happen, on that other board, and he for the most part was 95% right on. Go look at the history of the other sites. You will see it.

What is happening at AMR is not pretty. But WT does have a positive following for a key reason. Sorry if you do not always agree with him, but look at his past posting on various boards. He is pretty much on the mark.

Then can you please ask him to pick the winning lottery numbers for me? I'm sure he knows what they'll be.

 

[WorldTraveler]

I think in the end it comes down to what kind of workforce the employees want AA to be. Do they want 10 guys making $20/hr., or 20 making $10?

precisely... yet since benefits cost 40-50% of an employee's salary, reducing the number of employees and increasing the productivity of the ones who remain will automatically result in a reduction in costs to the company - and make it a whole lot easier for AA to think about restoring at least part of the pay that its people gave up in 2003 since AA says they will only look at cost-neutral contract proposals.

How much to own vs. lease is a balancing act that every business faces.

If you buy the facilities, you are often stuck with them when business falls off.

How long did DL continue to pay rent on Terminal E (4E) at DFW? Or the DWH hangar? Or the cargo sorting facility? How about all the empty concourse space at CVG when they cut that hub back? And now with the cuts at MEM, I suspect DL is signatory on the facility lease, not the regionals.

Yes, there is always the risk when contracting out for space and/or services that there won't be room at the inn.

You, Bob & others say AA has decided to keep TUL because it's cheaper and a good investment. But nobody really knows for sure if that's really the case. AMR is holding the cost cards close to the vest, and it's still not clear to me that there is flexibility in the current contract to allow them to do a wholesale outsourcing of overhaul. Another possible issue is the environmental issues. We've already seen where MCI had ground contamination issues. IIRC, CO had the same ground contamination abatement/liability issues when they closed down ELP maintenance in one of its bankruptcies. It wouldn't surprise me to see that UA's SFO facilities and the former NWA facilities have similar issues. (DL could not have any environmental issues because like Obama, they are one step removed from sainthood).

It's probably safe to say there is no one facility that could take on all of AA's overhaul, but if a sublease on the TULE facility came along with a 5-10 year contract to retain work, someone like Timco or STAero would probably consider taking the work and the lease/sub-lease if the environmental liability were also addressed.

The issue is not the actual facility costs but the PEOPLE who are required to staff it....TUL is a very old facility and while AA has improved and expanded it, there are parts of it that are undoubtedly paid for.
Even for terminals that have been part of hub reductions/closures, the terminal cost is far less than the cost of flying unwanted capacity. I'm sure AA paid for its facility costs at BNA, RDU, and SJC for years and perhaps still is at SJU and STL after pulling down its schedule. In bankruptcy, some of those excess facilities such as DL's maintenance facilities and unused gates at DFW were given back to the airport - and are for the most part being used by other carriers.

Outside of the industry-wide stories of the poor quality control at outsourced MRO facilities, I can't comment on how this works for other carriers. They hold the cards close to the vest also.

With all due respect, AA is facing the largest maintenance fine in the history of US aviation; I'm sure there will be those that will pop up and say that it was a conspiracy against AA and unions but the simple fact is that there is a correlation between maintenance quality as determined by the government and reality - it is not the only one but it is one that is quite transparent.
Even if there are maintenance problems coming from foreign MROs, the airline assumes complete responsibility when they pick up that plane and certainly by the time it places it back in revenue service. If there were truly problems, then airlines would be receving fines if they don't fix the problems.

Ladies and Gentleman,

As I have mentioned before, WT is THEE reason I started reading these forums. I started following him when he was talking about why the Delta/USAir merger was not going to ever happen, on that other board, and he for the most part was 95% right on. Go look at the history of the other sites. You will see it.

What is happening at AMR is not pretty. But WT does have a positive following for a key reason. Sorry if you do not always agree with him, but look at his past posting on various boards. He is pretty much on the mark.

thank you very much..... as I've said before, I stand by what I have said before. I am beholden to no one and I have a pretty good track record of accurately calling what is happening in the industry.

Then can you please ask him to pick the winning lottery numbers for me? I'm sure he knows what they'll be.

I dont' do lotteries, I don't give financial advice, and I don't do windows.

Knowing what you do well and sticking to it is part of the process of success in life.

Recognizing your weaknesses and working on them as well as knowing your strengths and using them is foundational for success in life.

 

[Hopeful]

I dont' do lotteries, I don't give financial advice, and I don't do windows.

Knowing what you do well and sticking to it is part of the process of success in life.

Recognizing your weaknesses and working on them as well as knowing your strengths and using them is foundational for success in life.

Geez WT, a little humor goes a long way.

 

[Kev3188]

Bingo!

Bingo indeed, and it's precisely why labor is collectively stuck spinning our wheels...

 

[enough already]

how about you read what I wrote?

I don't have the time nor could I care any less what you have to say. You are now ignored!

 

[WorldTraveler]

I don't have the time nor could I care any less what you have to say. You are now ignored!

For those who are mature enough to keep reading, how about we throw out the possibility that I just might be right?

Let's suppose that I am actually more like the cardiologist who is standing by your bedside as you lie in intensive care after your heart attack. Let's suppose that I am telling you that you need to lose weight, you need to quit smoking, you need to cut your intake of fat and salt, and that you need to exercise at least 30 minutes 3X/week.

Do you not think there are alot of people in the US who hear that news EVERY DAY after their first heart attack.

And there are a whole lot of people who hear their doctor say even before the heart attack that there are warning signs that one is coming. Some people change but far too many continue down the same path, only to have their first heart attack and get the "talking to" that I described above.

You don't understand all the things your doctor says to you or the data they read about you or the interpretations they make - neither do I.

But I am smart enough - and I surely hope you are - to recognize that there are people who know more than you do and can make the tough statements that you might need to hear even if you don't like what is being said.

We've had AA labor and mgmt "whistling through the graveyard" (to use the words of a wise man on this forum) because they don't like the news they are being told.

But shooting the messenger as if you will change the course of the bad news doesn't work... you can look at the nuclear plant problems in Japan as a perfect example of how denial and failure to act can cause far more damage and ultimately delay facing the reality that was there all along.

Don't act like Tokyo Electric Power Company - or the patient who tunes out the doctor's bad news just because it isn't pallatable.

Face the hard facts - challenge them if you want - but ultimately recognize that there just might be problems a whole lot bigger than what you think - and it would behoove you to face them instead of ignoring them.

If you choose to ignore, then let's check back in a couple years and see how it works out for AA.

Methinks the whistling through the graveyard act will come to a screeching halt in the very near future for AA and its employees.