Analyst Jamie Baker says AA won't cut labor costs as much as Horton would like

[eolesen]

Guys, it's not worth the effort. Ignore lists work great. If only they could ignore within quotes.....

Whole truth seems to be half truth more and more lately. Haven't heard a peep about the fate of the hypothetical sibling who works fo AA at DFW, but I hope he fares well. If he exists. Just like the Half Truth supporters who pop up here from time to time with minimal numbers of posts to their credit...

 

[WorldTraveler]

no, E, there are people who can stick to facts and either use them accurately or not make statements that are factually incorrect.

Jim has qualified his statements in ways that I can agree with... but it doesn't change the fact that for THIS YEAR, DL's pension costs are higher than AMR's and even accounting for the difference in size between DL and AA, AA's cost problem IS NOT directly related to pension costs. It is primarily productivity and medical cost related.
It is also true that DB costs TODAY are expensive because the stock market is not delivering any meaningful rates of return... as we well know, airlines and other companies with DB plans made virtually no cash contributions for years when the stock market was red hot so DB plans made sense... but it also doesn't change the fact that a FROZEN plan still requires funding and the fact that DL's pension liabilities ON ITS BOOKS are larger than DL's despite the fact that the PMDL pilots are not included means the pension costs to DL of their frozen plans are not going down very soon.
There is no doubt that BK -whether for DL who now has frozen vs. terminated plans - afforded all carriers the opportunity to restructure their employee costs - and to increase their productivity. But also note that DL and UA's productivity increased by more than 25% between the beginnings of their BK and the later part of the 2010s... a difference that did not occur for AA. When you factor in an effective 25% reduction in employee costs through increased productivity, then it isn't hard to see why DL and UA are profitable with more than a $1B reduction in employee costs, even after adding back some pay raises and profit sharing.
The real question continues to remain whether AMR will terminate or freeze its plans. For people like E who has stated that a termination will have a very negative effect on his ability to collect what he wants when he wants, I hope AMR doesn't terminate... and there are good financial reasons to believe such a decision would be good for AA.
But pension liabilities remain very real and are something that have to be balanced against other liabilities - the creditors can only be expected to be saddled with so much and they also cannot sign off on a reorg plan that leaves AMR with enormous amounts of debt.
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Where AMR will cut labor costs remains to be seen...

 

[dfw gen]

he might be a 7-11 employee hoping to fly one day.....

 

[dfw gen]

You got a point all of a sudden he's worried about your pension plan, his brother or relative has kind of fell out of the picture. Half truth?
These guys crack me up with their expert opinion.

 

[BoeingBoy]

But pension liabilities remain very real and are something that have to be balanced against other liabilities - the creditors can only be expected to be saddled with so much and they also cannot sign off on a reorg plan that leaves AMR with enormous amounts of debt.

On one hand pension costs aren't AMR's problem but on the other hand they're a very real liability and have to be balanced against other liabilities. Gotcha...

Jim

 

[paul1]

Come on Jim, everything in commercial aviation is compared to the beatified Delta Airlines.

I thought it was southwest

 

[chris perry]

Four, five, six hundred airplanes is this not just kicking the overhaul labor problem down the road? Equipment has to be repaired by someone sooner or later..If oil goes to 200 a barrel then what? They sure won't be flying to china for overhaul. The real problem here is fuel costs,yes some labor issues...
The bottom line is we have a bunch of old flt equipment that guzzles gas.Plus 300 regional jets that never really were profitable since oil went over 70 a barrel. I just hope they get the fleet mix right,ten years from now that's alot of overhaul coming due. Just like the MD80's that's 20 years worth of work.
These new airplanes are thin,cheaper built and will certainly require more structure work...

 

[WorldTraveler]

On one hand pension costs aren't AMR's problem but on the other hand they're a very real liability and have to be balanced against other liabilities. Gotcha...

Jim

if you understood the difference between costs and liabilities, then things would make sense.
But either way, AA has ONE major network carrier that has both ongoing (current - this year) pension costs and also has liabilities on its books - both of which are at higher levels than AA.
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Once again, it is apparent you made an incorrect comment with this comment in reply 126 "e DB pension plans are obviously a large cost that none of the competition has", found yourself corrected, and then try to turn it personal instead of being willing to admit you were wrong and gracefully walk away.


You danced around w/ some qualifications to back off your statement, I let you have them, but you decided you wanted to come back and go for another round... but your original statement was still wrong which was the only reason I responded in the first place.
How about demonstrating the integrity to admit you were wrong or gracefully moving on and just drop the subject.

I get that no one likes to be corrected on every mistake they make but this is also a public forum and I don't participate because I want people to like me.... if you want to make factually incorrect statements, then don't be surprised if you are called on your errors.

Perhaps what you are really arguing for is that AA employees should have their pension plans TERMINATED instead of frozen because then they would also be miserable.... but DL has shown that it is not necessary and that is exactly what the PBGC has argued to AMR.
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Yes, Chris, AA did not adjust its fleet plan to reflect current realities - and much of that involved AE... it is true that other carriers used BK to adjust their regional carrier plans - and it is also clear that AA will have to do the same thing now.
Your statement about pushing back maintenance is true... and because AA will be replacing more than half of its fleet in a 5 year period, there will be enormous spikes in the level of AA's future capital spending as well.
Fleet is obviously a huge part of an airline's business plan that must be solved... using those aircraft profitability is a different matter and is dependent on the network strategy.

 

[BoeingBoy]

First, I didn't back off my statement. I used 2010 pension & benefit cost since that's the last full year available and said so. You used partial 2011 liabilities. I still stand by what I said and have the numbers from the BTS to back it up.

It is you that want to compare post-bankruptcy post-merger DL with effectively pre-bankruptcy not merged AMR. To compare cost with liability coming due in the future. Comparing apples to oranges doesn't "prove" anything other than that they're different. Yet you pitch it like it really means something.

You mix cost with liability figures and say I don't understand the difference!!! What are liabilities - costs that will have to be paid in the future. With pensions, unless terminated, those liabilities can go up or down depending on how the underlying investments perform but unless the liability goes to zero there is a future cost. The benefit to freezing pensions, as opposed to leaving them on-going, is that there is an end to the liability. The number of future beneficiaries declines as those getting benefits die while they are not replaced by new hires. So eventually the liability goes to zero no later than when there are no more beneficiaries. Plus, as the pool of beneficiaries declines, the potential liability declines if ROI remains the same.

Jim

 

[Buck]

First, I didn't back off my statement. I used 2010 pension & benefit cost since that's the last full year available and said so. You used partial 2011 liabilities. It is you that want to compare post-bankruptcy post-merger DL with effectively pre-bankruptcy not merged AMR. To compare current year cost with future liabilities. Comparing apples to oranges doesn't "prove" anything other than that they're different.

What are liabilities - costs that will have to be paid in the future. With pensions, unless terminated, those liabilities can go up or down depending on how the underlying investments perform but unless the liability goes to zero there is a future cost. The benefit to freezing pensions, as opposed to leaving them on-going, is that there is an end to the liability. The number of future beneficiaries declines as those getting benefits die while they are not replaced by new hires. So eventually the liability goes to zero once there are no more beneficiaries.

Jim

I have been wrong in the past...........

 

[BoeingBoy]

As have I and I'll be the first to man up to a mistake when it's pointed out. But I'll be darned if I'll be lectured to by someone who claims to know "The Whole Truth." I don't think such a person exists...or at least not for 2011 years...

Jim

 

[Buck]

As have I and I'll be the first to man up to a mistake when it's pointed out. But I'll be darned if I'll be lectured to by someone who claims to know "The Whole Truth." I don't think such a person exists...or at least not for 2011 years...

Jim

So, you and I admit that at some point we may have been in error, right? I am glad I am not alone. Now if I could just get the union to admit it also.

 

[BoeingBoy]

Good luck with that....

Jim

 

[Kev3188]

Come on Jim, everything in commercial aviation is compared to the beatified Delta Airlines.

Delta uber alles. 🙄

Man, I miss the Red Tail...

 

[WorldTraveler]

This discussion has no more to do with DL than it does NW or CO who also had pension obligations on their books as of the time they were acquired by DL and UA respectively. UA in fact also has pension obligations in the future and current pension expense for PMCO employees ... so the only reason why DL is being mentioned is because DL's pension obligations - future - and cash expenses - present - are far larger than AA's. The notion that AA is the only network that continues to have either current or future obligations is incorrect. Plain and simple. Whether the BTS says so or not.
The BTS measures data for different purposes than what is required under accounting rules. DL has costs which remain on its books for its employees (PMDL and PMNW) because those liabilities and cost exists, whether or not the BTS is focused only on current costs for current employees.
While your concept of future liabilities and costs is correct, Jim, DL and NW froze their plans in 2005. They could have pension obligations to employees who accrued benefits under those planes well into the middle of the century so the obligations aren't going anywhere anytime soon.
Obviously the sooner AA's plans are either terminated or frozen, the faster the process of winding down those obligations can begin.
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The sole reason I continue to harp on the subject is because analysts have parrotted AA mgmt's line that pension costs are - at least in part - what has driven AA's uncompetitiveness. The fact that DL has pension obligations larger than AA's and UA also has pension obligations for CO employees does not jive with the reality that it is possible to survive with BK.
It amazes me that some of the same people who argue for how companies raped employees in BK are the ones who want to deny that some of those costs are really still on the books - yet those same people won't hesitate to collect their pension benefits either from the airlines directly or the PBGC - which gained equity in the reorganized companies as a result of the terminations.
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The notion that AA employees MUST have their pensions terminated or even frozen is patently wrong.... pension obligations are one of the least of AA's problems. If AA didn't have to pay retiree medical, its employees paid market prices for their current premiums, and most importantly if AA either had about 10K less employees or a network about 15% larger, then pensions wouldn't even be an issue.
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Continuing to echo that pensions are the problem is simply giving approval for AA mgmt and the creditors to take away pension benefits when that is in fact not the problem.
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Failing to recognize the true problem while believing what the company and some analysts say is an invitation for them to take advantage of AA employees and get what they want.