Bankrupcy On The Way?

[Borescope]

"Profitability is such a problem at American that the company is exploring charging for on-board food and renting portable entertainment systems. Consider that JetBlue offers free entertainment at every seat. Is it good to differentiate American by charging for entertainment?


While American claims fuel prices are driving its problems, the real culprit is $22 billion in debt and aircraft leases. When rivals such as Southwest Airlines have more cash than debt, they have an automatic operating advantage.


Although American did raise fares $5 one-way yesterday, it is also reporting in its SEC filing that it is trying to refinance an $834 million line of credit because August revenues fell short of expectations.


Delta might be first to seek protection, but it looks like American is leaning to join United Airlines parent UAL (OTC BB: UALAQ) and US Airways (OTC BB: UAIRQ) in bankruptcy too."

 

[WorldTraveler]

And that is precisely why the ATSB has to fight vigorously to keep UA from dumping its pensions – or at least drag it out until the crisis has passed at AA and DL. Both of those managements know that they have to cut more than just employee costs so they are not counting solely on bankruptcy to eliminate employee pensions. Aside from a couple hundred million more in aircraft lease costs that could be extracted in bankruptcy, none of the other legacies gain anything more by going through bankruptcy as they do outside of it. Yes, the industry dynamics do change if all of the legacies decide to file bankruptcy but I think you will be see Washington be forced to respond if that appears likely; the aviation lending community is relatively small and would be severely impacted if another airline enters bankruptcy.
If United succeeds at terminating its pension plans, the other legacies will clearly be forced to increase their cost cutting efforts to remain competitive. I doubt that the allure of dumping pension obligations will be enough to cause the other legacies to jump into bankruptcy. Let’s keep in mind that the reason United and USAirways are in bankruptcy is because they were not running viable businesses, not simply because they had costs they wanted to shed.

 

[WorldTraveler]

Another factor to consider is that AA still is at risk for significant revenue erosion at DFW and MIA, two hubs along with the Caribbean that have been relatively immune to low cost competition. Although there are those that think AA should be dancing in the streets because of DL's pulldown at DFW, DL actaully exposed AA to much greater risk of LCC incursion to the point that it is nearly certain that one or more LCC carriers will greatly expand their DFW presence. The Caribbean is already seeing LCC competition for the first time and it will only grow. AA has probably taken the biggest hits in the transcon markets but more will come to BOS and IAD. JetBlue is weighing expansion to MIA - the question is just when.

AA will clearly have to adjust its costs to match reduced revenues.

DL has very little of its North American network that is still vulnerable to low cost carrier incursion.

 

[Wretched Wrench]

If United succeeds at terminating its pension plans, the other legacies will clearly be forced to increase their cost cutting efforts to remain competitive.

[post="184149"][/post]​

United Filing Rejected By Bankruptcy Judge

Forbes.com

 

[Fly]

for now.......they can't tell them they can't do it. They must prove they are unable to pay and that shouldn't be too difficult. Especially since they aren't paying already.

 

[AAmech]

It's also important to remember that not every airline's Pensions are in the Horrible shape UA's and US's are in. AA and CO have Pensions that are underfunded but are still manageable and salvagable.

 

[WingNaPrayer]

It's also important to remember that not every airline's Pensions are in the Horrible shape UA's and US's are in. AA and CO have Pensions that are underfunded but are still manageable and salvagable.

[post="184274"][/post]​

But WHERE are AA's pension funds being invested? Go in search of that question and you'll find some interesting reading.

 

[Wretched Wrench]

But WHERE are AA's pension funds being invested? Go in search of that question and you'll find some interesting reading.

[post="184314"][/post]​

Didja search? Whadja find?

 

[Bagbelt]

The investment co. that quote comes from never has anything positive to say about anything they are not selling. Not to say everything is rosy, but the plans they made called for cheaper oil. Oh well, so we start over. I think it took 10 years to get where we are and it's going to take that long to get back on our feet. 9/11 hurried it up, but Bob c. said exactlly this was going to happen back when the
"transition plan" was pushed. Except for a few great years the majority of the last decade before 9/11 was flat on earnings. And even the good years were helped by junior pay scales in maint. and the ramp along with a 6% pay raise over 6 years. Every time I have to go over to eagle I see new equipment, so money is being invested somwhere.

 

[mwa]

Julius Maldutis (sp) long time analyst said in an interview MSNBC that if DAL entered BK that AMR could not avoid it. Helane Becker also said that AA would have to consider this if DL filed.

 

[mistified]

Julius Maldutis (sp) long time analyst said in an interview MSNBC that if DAL entered BK that AMR could not avoid it. Helane Becker also said that AA would have to consider this if DL filed.

[post="184432"][/post]​

Then so will CAL,NWA, and the list goes on and on and on......??????????

Playing devils advocate here. Someone please tell me how filing chapter 11
has made UAL or USAIR more competitive? Has it lowered their cost per seat mile to a level where they can compete better than AA? I don't think so. And so while I use to think that would be the case I don't believe that anymore. Therefore Julius Maldutis and Halane Becker's view don't necessarily hold water.

 

[Garfield1966]

Then so will CAL,NWA, and the list goes on and on and on......??????????

Playing devils advocate here. Someone please tell me how filing chapter 11
has made UAL or USAIR more competitive? Has it lowered their cost per seat mile to a level where they can compete better than AA? I don't think so. And so while I use to think that would be the case I don't believe that anymore. Therefore Julius Maldutis and Halane Becker's view don't necessarily hold water.

[post="184491"][/post]​

My understanding is that if they are permitted to dump the pension fund, then all other carriers would be forced to follow suit in order to remain competitive.

 

[mistified]

My understanding is that if they are permitted to dump the pension fund, then all other carriers would be forced to follow suit in order to remain competitive.

[post="184535"][/post]​

Maybe so but I am refering to the "domono theory" of bankruptcy.
I don't agree that it necessarily makes one more competitive.

 

[Wretched Wrench]

Chapter 11 of the Bankruptcy code allows a company financial advantages that competitors would not have. That is, unless they threatened Chap 11 to wring concessions from unions. But BK is still better, as they can stiff their creditors, too.

There are lawyers and consultants who specialize in advising companies how to profit by use of Chap 11.



Search Amazon Books for "corporate bankruptcy":



.

 

[mistified]

Chapter 11 of the Bankruptcy code allows a company financial advantages that competitors would not have. That is, unless they threatened Chap 11 to wring concessions from unions. But BK is still better, as they can stiff their creditors, too.

There are lawyers and consultants who specialize in advising companies how to profit by use of Chap 11.
Search Amazon Books for "corporate bankruptcy":
.

[post="184821"][/post]​

So you must mean like UAL and USAir? They are more competitve now?
I don't think so!!
This sounds good in theory but it has not been workng out that way in the real airline world.