A few things about scope and definitions.
1. According to "The Plan" that was approved by the Bankruptcy judge at AMR, the New American will immediately engage in it's "Right Sizing" initiative. In a truncated response, that means it wants to ditch most of its 50 seat planes and expand the use of 70+ seat planes. It achieved the go ahead with the pilot union APA. Moving forward, it will MOST DEFINATELY want to abolish the language in the fleet service agreement [the only agreement on the property that still defines a mainline as a 69+ seat plane] that defines a company mainline fleet as a jet with more than 69 seats. Brothers and sisters, imo, this is HUGE and can't be compromised since the industry trend is 70+ seat regional jets. Both Delta and United put in monster orders for such planes. And the New American's "The Plan" has a bullseye on that path as well.
Also of note, although not pasted below, is the synergies of over $1 billion more net profits it projects by 2015. For those who want to read the "Right Sizing" plan, read below.....
( B) “Right-Sizing” the Debtors’ Regional Fleet
As of the Commencement Date, approximately 80% of the Debtors’ regional fleet consisted of aircraft with seating capacity for 50 or fewer passengers. Over the past decade, however, the Debtors’ major competitors have replaced many of their 50-seat regional jets with larger regional jets that accommodate 70 or more passengers. To improve their competitive position, the Debtors need to increase the proportion of larger regional jets in their fleet, thereby maximizing efficiency and revenue in regional markets through improved matching of aircraft capacity with passenger demand. Although restrictions imposed by the prior CBA with the APA prohibited American from using or acquiring additional regional jets with more than 50 seats, the new CBA with the APA expands American’s ability to acquire additional regional jets with more than 50 seats. Accordingly, the Debtors plan to accelerate the retirement of smaller regional aircraft— those with 50 seats or less—thereby increasing their ability to acquire a significant number of larger regional jets with 51 to 76 seats.
© Section 1110
As of the Commencement Date, American and Eagle maintained a combined fleet of over 900 aircraft, substantially all of which were leased or subject to various secured financing arrangements. Under Section 1110, beginning 60 days after filing a petition under chapter 11 of the Bankruptcy Code, certain secured parties, lessors, and conditional vendors have a right to take possession of certain qualifying Aircraft Equipment that is leased, or subject to a security interest or conditional sale contract, unless the Debtors, subject to approval by the Bankruptcy Court, agree to perform under the applicable agreement and cure certain defaults as provided in Section 1110. Any such action on the part of the Debtors will not preclude the Debtors from later rejecting the applicable lease or abandoning the Aircraft Equipment subject to the related security agreement or from later seeking to renegotiate the terms of the related financing. The Debtors may extend the 60- day period, with Bankruptcy Court approval, by agreement with the relevant financing party. The 60-day period under Section 1110 in the Chapter 11 Cases expired on January 27, 2012. In accordance with the Bankruptcy Court’s Order Authorizing the Debtors to (i) Enter into Agreements Under Section 1110(a) of the Bankruptcy Code, (ii) Enter into
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Stipulations to Extend the Time to Comply with Section 1110 of the Bankruptcy Code, and (iii) File Redacted Section 1110( B) Stipulations (the “Section 1110 Order&rdquo😉, dated December 23, 2011 (ECF No. 455), the Debtors have entered into agreements to extend the automatic stay or agreed to perform and cure defaults under financing agreements with respect to substantially all Aircraft Equipment in their fleet.
With respect to certain Aircraft Equipment, the Debtors have reached agreements on, or agreements on key aspects of, renegotiated terms of the related financings, and the Debtors are continuing to negotiate terms with respect to certain of their Aircraft Equipment. The ultimate outcome of these negotiations cannot be predicted with certainty. To the extent the Debtors are unable to reach definitive agreements with the financing parties, those parties may seek to repossess the subject Aircraft Equipment. The loss of a significant number of aircraft could result in a material adverse effect on the Debtors’ financial and operating performance.
As of January 31, 2013, and in accordance with the Section 1110 Order, the Debtors (i) rejected 40 leases relating to 32 mainline aircraft and eight spare engines; (ii) relinquished one aircraft that was subject to a mortgage; (iii) made elections under Section 1110(a) to retain 340 mainline aircraft and 87 spare engines; and (iv) reached agreement on revised economic terms of the financing of 155 mainline aircraft (which agreements are generally subject to certain conditions, including reaching agreement on definitive documentation). In addition, the Debtors reached an agreement with the lessor to modify the leases of 39 Super ATR aircraft. As of April 5, 2013, all Super ATR aircraft had been returned to the lessor as allowed under the modified agreement.
(d) Key Restructurings
(i) Embraer Fleet Restructuring
On August 31, 2011, American entered into a Master Purchase Agreement (the “Eagle Aircraft Purchase Agreement&rdquo😉 with Eagle and Executive, whereby Eagle and Executive agreed to transfer certain aircraft and related assets to American in exchange for American’s assumption of Eagle’s outstanding debt obligations related to such aircraft (the “Eagle Aircraft Transaction&rdquo😉. More specifically, Eagle and Executive transferred, among other things, the Eagle Aircraft—comprised of 47 CRJ-700 aircraft (collectively, the “CRJ Aircraft&rdquo😉 and 216 Embraer aircraft, comprised of 39 ERJ-135s, 59 ERJ-140s, and 118 ERJ-145s (each, an “Embraer Aircraft,” and collectively, the “Embraer Aircraft&rdquo😉, to American in exchange for American’s assumption of Eagle’s outstanding debt obligations relating to both the CRJ Aircraft and the Embraer Aircraft (the “Embraer Aircraft Obligations&rdquo😉 and certain other consideration.
The Embraer Aircraft were originally financed through certain prepetition mortgage financing arrangements with Agência Especial de Financiamento Industrial, as lender (“FINAME&rdquo😉, Banco Nacional de Desenvolvimento Econômico e Social (“BNDES,” and together with FINAME, the “Financing Parties&rdquo😉 and The Bank of New
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York Mellon Trust Company, N.A., as security trustee (the “Security Trustee&rdquo😉. Shortly after the Commencement Date, the Debtors and the Financing Parties began negotiating the restructuring of the Embraer Aircraft Obligations or the return of the Embraer Aircraft. The Debtors and the Financing Parties, while continuing negotiations for a long-term restructuring of the Embraer Aircraft Obligations, also reached an interim agreement, whereby the parties agreed, among other things, that the Debtors will (i) surrender 18 ERJ- 135s (the “Parked ERJ-135 Aircraft&rdquo😉 that were parked and not necessary to the Debtors’ operations and (ii) make monthly security deposit payments with respect to the remaining Embraer Aircraft that will be credited toward payments in respect of Embraer Aircraft Obligations relating to such Embraer Aircraft. Pursuant to such interim agreement, the Debtors surrendered the Parked ERJ-135 Aircraft and transferred title to such Parked ERJ- 135 Aircraft to the Security Trustee on June 21, 2012.
To facilitate a long-term restructuring of the remaining Embraer Aircraft Obligations, AMR, American, and Eagle, along with the Financing Parties, the Security Trustee, and certain other parties (collectively, the “Restructuring Parties&rdquo😉, agreed to enter into certain transactions (the “Embraer Restructuring Transactions&rdquo😉, the terms of which were embodied in the Master Restructuring Term Sheet Relating to 21 ERJ135, 59 ERJ140, and 118 ERJ145 Aircraft (the “Master Term Sheet&rdquo😉 and the Lease Term Sheet Relating to 21 ERJ135 Aircraft (the “Lease Term Sheet,” and together with the Master Term Sheet, the “Term Sheets&rdquo😉, each dated as of September 3, 2012.
The Embraer Restructuring Transactions provided for in the Term Sheets include, among other things, the following:
Restructuring the Embraer Aircraft Obligations. American will transfer and lease back, subject to the terms and conditions set forth in the Lease Term Sheet (including reaching agreement on definitive documentation), the 21 remaining ERJ-135s (the “Remaining ERJ-135 Aircraft&rdquo😉, whereby American will pay $40,000/month under leases that will expire between January 1, 2013 and December 31, 2013 and, upon consummation of such transfer and lease back transaction with respect to a Remaining ERJ-135 Aircraft, American will no longer have any payment obligations in respect of the Embraer Aircraft Obligations relating to such Remaining ERJ135 Aircraft; American will make payments, including monthly security deposit payments, in respect of the Embraer Aircraft Obligations relating to all 59 ERJ-140s as if such Embraer Aircraft Obligations have been reduced by 49%; provided, however, such Embraer Aircraft Obligations will not be formally reduced until existing financing documents relating to such ERJ-140s are amended to implement such reduction in accordance with, and subject to, the terms and conditions (including reaching agreement
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on definitive documentation and the Debtors’ emergence from the Chapter 11 Cases) set forth in the Master Term Sheet; American will make payments, including monthly security deposit payments, in respect of the Embraer Aircraft Obligations relating to 68 of the ERJ-145s (the “Newer ERJ-145 Aircraft&rdquo😉 as if such Embraer Aircraft Obligations have been reduced by 34%; provided, however, such Embraer Aircraft Obligations will not be formally reduced until existing financing documents relating to such Newer ERJ-145 Aircraft are amended to implement such reduction in accordance with, and subject to, the terms and conditions (including reaching agreement on definitive documentation and the Debtors’ emergence from the Chapter 11 Cases) set forth in the Master Term Sheet; and American will make payments, including monthly security deposit payments, in respect of the Embraer Aircraft Obligations relating to the remaining 50 ERJ-145s without any reduction of such Embraer Aircraft Obligations.
