Boston Base

[eolesen]

It may have been intentional, but you left out a few, like SEA, SFO, IAH, ATL, PHX, SAN and maybe some others.    Doesn't change your point, that BA flies about twice as many flights to LHR as does AA.

Here's another cut:
 

	AA	US	BA	Total	AA%
JFK	4	0	9	13	31%
ORD	5	0	2	7	71%
PHL	0	3	2	5	60%
BOS	0	0	4	4	
DFW	3	0	1	4	75%
MIA	2	0	2	4	50%
EWR	0	0	3	3	
LAX	1	0	2	3	33%
IAD	0	0	2	2	
IAH	0	0	2	2	
SFO	0	0	2	2	
ATL	0	0	1	1	
AUS	0	0	1	1	
BWI	0	0	1	1	
CLT	0	1	0	1	
DEN	0	0	1	1	
LAS	0	0	1	1	
PHX	0	0	1	1	
RDU	1	0	0	1	
SAN	0	0	1	1	
SEA	0	0	1	1	
					
	16	4	39	59

 

[WorldTraveler]

Profit sharing checks and shareholders seeing returns on their investment don't really care how long it's been since emerging from bankruptcy.

in fact, long-term investors = which the airline industry large does NOT have - want to see long-term success and not a few flash results. Let's remember that up to this point, we have seen precisely ONE quarter of financial results from AA/US operating as one airline - and the don't represent an integrated airline or one that even has had to divest the assets that were part of the DOJ's rquirements for the merger.

profit sharing checks? pfft
tell me what the value of those will be for AA/US employees based on the supposed $3B in profits that AA should see this year.  
 

Here's another cut:

so what's your point?

to show that BA is so overwhelmingly large that AA couldn't possibly put its own metal in markets that matter, including BOS?

when AA gets serious about returning its own metal to BOS-LHR, then perhaps it will have some basis for arguing that it wants to grow BOS.

Until then, cutting RJ routes and not putting AA metal in the one market where they could fly with virtually no impact to their revenues should be pretty easy to do.

 

[FrugalFlyerv2.0]

I'd have to figure out what they are doing with the slot on those days but, no, it doesn't mean anything without knowing the whole picture.
 

 
 

... ... .... Let's remember that up to this point, we have seen precisely ONE quarter of financial results from AA/US operating as one airline - and the don't represent an integrated airline or one that even has had to divest the assets that were part of the DOJ's rquirements for the merger.
 
....

so what's your point?

 
Eolesen:  thanks for posting the data/numbers.
 
WT:  I don't mean to be a d!ck- but you could learn something from these posts.  Eolesen made the statement that in the AA/BA JV it appears that on USA-LHR routes AA is focusing more on flights from its hubs, whereas BA to/from everywhere else.  More importantly, he actually presented some data/numbers to back up his hypothesis - a trait you seem to severely lack. 
 
It's kind of funny for you, a highly educated aviation expert to not 'grasp' the point.  Although I think you did but are acting like an a-hole out of spite and at the same time in a few posts lecturing about "knowing the whole picture". 
WholeTruth, eh?
 
PS:  if AA/US is already making nice profits after operating just 1 quarter as one airline, how much higher could the profits be after full integration?

 

[WorldTraveler]

no, I totally grasp the point.

We have a thread talking about how important BOS is to the new AA network but then saying that it isn't important enough for AA to deploy its own metal there.

you also miss the point that BK provides a honeymoon in which you have a cost advantage and in the case of AA/US a revenue advantage because of eliminating US' pricing policies.

every other merger has had an advantage in costs that comes after emergence but starts to end as costs go up.

CO had a large cost advantage after 2 BKs that lasted for 10-15 years and they used that time to build EWR... but just as their cost advantage was winding down, competition heated up in NYC as DL built its presence at LGA and JFK.

AAs cost advantage isn't hear as large as what CO had - it was only 2% lower than DL's in the most recent quarter and WN is about 5% lower than AA. thus, the cost advantage WILL wind down because outside of BK everyone else has the same tools to keep costs down that you do. the fact that DL's costs are only 2% higher than AA's and DL has been out of BK for 7 years shows how high AA's costs had grown but also how they really didn't get their costs down that low relative to their competitors although they made great progress.

further, AA has YET to see the pricing pressure from the slot divestiture at DCA and LGA as well as the opening of Wright and the new competition that is coming in AA's key Latin region when WN focuses their growth efforts on Latin America and the Caribbean - and does it from Texas and S. Florida. B6 continues to grow.

keep in mind, also, that AA/US merged and AA emerged from BK in perhaps the best environment the industry has seen since 9/11 and a big reason for that success is the cuts in capacity that other carriers have made.

DL/NW announced their merger right before the financial system meltdown in 2008, UA/CO merged shortly after but neither merged resulted in significant changes to costs or revenue - other than considerably higher fuel prices based on a weaker dollar. As DL reduced 50 seat heavy RJ hubs, capacity came out of the system.... DL was the most aggressive carrier in cutting capacity in the US industry.

The FL/WN merger has resulted in significant reductions in the availability of deep discount seats as FL's pricing was eliminated. WN has also removed a lot of domestic capacity from FL/WN markets in order to support their new DCA and DAL flying.

OTOH, AA/US has used the strengths of the industry to push into other carrier strength markets rather than so far doing its part to reduce capacity in the industry.

It should come as no surprise that if AA/US wants to use its merger primarily as a means to grow its network at the expense of other carriers while piggybacking on the success that other carriers have obtained in the industry, then other carriers WILL quickly focus their growth efforts into AA's key markets to stop their growth and protect what those carriers have obtained in their restructurings.

that is basic business strategy.

the fact that DL and UA are both growing as aggressively as they are in Latin America says they will deploy their assets in AA key markets disproportionately as necessary to reduce AA's advantage if AA wants to use its merger and low costs to the harm of other carriers instead of for the long-term benefit of the industry which is what other carriers have done.

given that AA has yet to face the reality of even the government required divestitures, I suspect the other carriers know what is coming to AA and are willing to let that take effect.

So, on both the cost and revenue side, AA faces far more pressures than any other carrier and they have yet to prove that they can succeed in that environment as well as they are today.

I'm glad AA is doing well now but a whole lot of people want to try to argue that AA is set for long-term success and that simply has not been proven.

 

[commavia]

PS:  if AA/US is already making nice profits after operating just 1 quarter as one airline, how much higher could the profits be after full integration?

 
What an interesting question!
 
Now that Delta really has no discernible network advantage over AA, we've been treated in the recent past to a greater focus on the alleged financial superiority of Delta, but of course now that this line of argument is starting to crumble, we're getting treated to revisionist history theories about how AA's financial improvement doesn't really count, it seems, because the company just exited bankruptcy.  Fascinating.
 
While it's true that AA is benefiting today from some financial benefits as a result of a recent bankruptcy restructuring, and that some costs will gradually rise over time, it's also true that in other areas AA is only beginning to reap the financial benefits of restructuring and the merger.  For example, much of the network and revenue synergies are only just starting, and haven't been anywhere close to fully leveraged yet.  There are still hundreds of brand new, highly fuel efficient aircraft with a maintenance holiday still yet to arrive and replace 20-year-old MD80s and 757s.

 

[WorldTraveler]

AA is a larger DOMESTIC airline than DL but DL is still larger across both the Atlantic and the Pacific.

Further, DL is PROFITABLE flying to both of those regions... doing that is still a dream for AA.

yes, the new aircraft will cut fuel expense but they also only gain much of their benefit if the people that support the current old fleet are pushed out the door... .and parker has yet to deal with that "problem"

further, AA/US' leverage is the highest in the industry - higher than UA - and will only grow as those new aircraft come online.

all the operating cost advantages mean nothing when AA is paying hundreds of millions more in interest payments or higher leases than their peers. and in an industry downturn such as if the middle east or Europe melts down, AA can't walk away from those payments without another trip to BK

AA has yet to demonstrate that it is capable of succeeding as it is today for the long haul.

 

[commavia]

Missing the point - since 2006.
 
This isn't about who is #1 on a meaningless ranking.  It's about network breadth, and market access.  AA is now essentially at parity with Delta and United across the Atlantic because it flies to all the major European markets from at least one U.S. megahub, and has a very strong ATI/JV across the Atlantic that ties AA's U.S. domestic network into two of Europe's largest hubs.  From a strategic standpoint, there is little difference between #1 and #3 among U.S. carriers to Europe, unlike in, say, Latin America, where #1 is essentially the size of #2 and #3 combined.
 
Keep repeating the line about Delta's profitability, while ignoring that DOT-reported numbers carry fairly critical caveats about how airlines account for revenue and allocate cost on a segment, regional and network basis.  Personally, I'll stick to the numbers that truly matter - overall profitability and cash generation on an overall network basis.  And in that regard, AA is definitely now approaching, if not already at, parity with Delta - and far exceeding United.

 

[WorldTraveler]

funny but you joined in along with everyone else that said that the AA/US merger would make AA the largest airline in the world.

and you attempt to justify it by arguing that AA is still #1 in Latin America but no one can ever catch with AA but you fail to note that the position AA has in the Pacific is far smaller than DL or UA and AA has subsidized it to the tune of several hundred million dollars per year.

Go right ahead and focus on cash generation because that is indeed a key metric and one where AA doesn't do near as well as you want to think they do.

see here:

"Delta Air Lines (NYSE: DAL ) has turned into a massive cash cow in the last few years. Since the end of the Great Recession, the airline industry has become much more stable and profitable, and Delta has been leading the way.

"Most importantly, unlike its top rivals -- American Airlines (NASDAQ: AAL ) and United Continental (NYSE: UAL ) -- Delta is keeping its capital spending in check. This will enable it to generate an average of $3 billion in annual free cash flow for the next several years.

"American Airlines has also posted strong earnings growth recently, and it may earn nearly the same pre-tax profit as Delta this year. However, American is spending tens of billions of dollars to replace dated aircraft in the next several years: roughly $5.5 billion per year through 2018.

"American Airlines is spending heavily on new aircraft, limiting free cash flow. Source: American Airlines.

"Even if American Airlines matches Delta's annual operating cash flow target of $6 billion, that would produce meager free cash flow of $500 million until American's heavy investment cycle winds down. If American is just slightly less profitable than Delta, then it could produce no free cash flow whatsoever for the next five years.

"Going forward, Delta is on pace to generate enough free cash flow that it will be able to return more than $1 billion to shareholders each year, while also setting aside plenty of money for debt reduction and pension funding. That's a record none of its competitors can match."


http://www.fool.com/investing/general/2014/05/10/delta-air-lines-inc-is-the-cash-king-of-the-airlin.aspx

AA is using the same strategy that Parker used at US which was to produce handsome profits - based on low labor costs and while building massive debt.

You and others seem to want to forget that US had about a $2B debt payment due in the next couple years that either has to be paid off or renegotiated.

AA is generating PROFITABILITY on par with DL, but it far more heavily in debt than either DL or UA. It is easy to build profits today while growing debts that will become a key differentiator between competitors in the future.

It is no surprise that Alaska and Southwest are both hugely profitable, but also very frugal in their spending and have debt levels well below what their legacy peers have.

Several of DL's debt metrics are now approaching levels half of what new AA has - and that is AFTER AA's emergence from BK.

Further, if you have bothered to read the DOT's consumer reports, you would see that UA is running a better operation than standalone AA in terms of on-time, fewer cancelled flights, and baggage handling.

All of those reasons that customers fled UA are ending and it is AA that is now at an operational disadvantage.

and specific to this discussion, a company's ability to sustain competitive incursions into other company's strength markets is directly related to its overall financial strength. It is no surprise that WN has sustained its growth into other carrier markets based on its financial strength that has long been an advantage over its peers.

 

[commavia]

"Massive debt."  AA's "massive debt" - on a net basis, a metric used by Delta and therefore seemingly infallible - is remarkably close to Delta's, despite the fact that it took Delta half a decade to get to this point post-bankrupty.
 
Meanwhile, the recitations on how AA is deploying cash are completely separate from the point I was making about how AA is generating cash.  Parker has recently said that the new aircraft AA is choosing to buy - buy, not lease - are still a good financial bet because AA can borrow in the capital markets at extremely favorable rates that compare well to AA's overall cost of capital, and the margins it is producing, and therefore these new aircraft and the direct cash savings they produce in terms of fuel and maintenance are "worth it."
 
I see someone still needs to brush up on basic financial accounting ...

 

[WorldTraveler]

basic finances say that if you are taking on more debt than you are generating cash, your debt will go up.

AA is in exactly that position - which was where Parker was with US before the merger. Superficial profits.

New aircraft do cut fuel consumption but they also require much higher debt and/or lease payments.

It has yet to be shown that other carriers are going to be at a disadvantage to AA in terms of fuel efficiency but AA will absolutely have more debt than AA will.

whether new aircraft are "worth it" or not has to do with more than just fuel burn.

And the thesis these new aircraft is in part that AA gets a maintenance honeymoon but that doesn't matter if AA still has thousands of the same workers on the payroll.

the fact that professional analysts are saying the same thing I have said obviously makes no difference to you.

 

[commavia]

No, basic finance says that if you can take on debt at rates that compare favorably with your cost of capital and that you can generate internally (via capital supplied by investors/shareholders), and that debt can be deployed to finance long-term investments in the enterprise and/or refinance debt previously financed at less favorable terms, you should do it.
 
Keep digging.

 

[WorldTraveler]

except that AA CANNOT generate cash at the rate DL is generating while taking on debt that DL is not taking on.

and you seem to think that ONLY AA can get low interest rates.

DO you think that DL and WN aren't capable of getting just as good of interest rates as AA can.?

the difference is that DL and WN BUY LESS in the first place so they need to borrow less.

and yet DL and WN have yet to be shown to be at a disadvantage in fuel costs to AA who will have more debt.

you seem to forget they are also buying new generation aircraft as well. just fewer of them.

it's not rocket science.


any other professional analysts you want to call wrong?

and specific to Asia, UA's updated guidance indicates that Asia might be doing better than they previously indicated which does provide a little more room for AA to grow but will certainly help DL and UA who have much larger Asian systems than AA.

and DL's fuel guidance from its traffic report compared to UA's in its investor update says that DL has a 13 cent/gallon advantage over UA in terms of fuel.

Since AA doesn't provide fuel guidance - or hasn't - it is hard to know where AA will fall but DL had a fuel cost advantage to every other carrier in the last quarter.

If DL has a fuel cost advantage that overcomes much of the fuel efficiency advantage that AA has but gets it at far lower capital cost, then DL is as good as if not better off than AA or UA who are spending far more money on new aircraft.

 

[commavia]

Hahaha.  I guess all that extensive education has provided great training to - selectively - read the musings of "professional analysts" on the internet.  Personally, I'll stick with my own education - in finance, and accounting - and my ability to read and understand a balance sheet, income statement, and statement of cash flows.
 
And more importantly, I'll rely on the education of Doug Parker and Scott Kirby, who, unlike some other self-appointed experts, have actually been charged with running a publicly traded corporation and creating and delivering value to shareholders.  They both seem to think that AA's current capital position - debt and cash - isn't all that bad, and that selectively and opportunistically financing investment, growth and debt retirement at favorable interest rates is a smart strategy.  But I guess they don't know anything ...

 

[WorldTraveler]

I just love how nicely you have fallen in line behind Parker after telling us all why the nAAtive mgmt. team was better.

are you trying to hold onto a job at Centerpork?

Parker wouldn't know what solid finances are like because US didn't have it and neither did HP.

Fortunately for Parker, neither did most of US' key competitors except for WN which did a very nice job of running US out of far more markets than US did to WN.

And now Parker is lining up in his high debt philosophy of running an airline alongside UA while on the other side of the industry we have ALK, LUV, and DAL which are all saying less debt AND lower overall costs is the model for long-term stability and success.

we'll have a great showdown of business philosophies in the industry but anyone that thinks that taking on more debt is going to win over lower debt and the same costs will truly be in for a surprise.

 

[commavia]

And there we have it - when all else fails, and arguments are exposed as meaningless drivel, resort to nonsensical, equally-meaningless personal "attacks."  Keep criticizing all those who aren't "defenders of the Delta faith" as "nAAtive mgmt." apologists from "Centerpork" - it only serves to further undermine what tiny shreds of credibility may be left.  And meanwhile, AA's finances continue to improve, its network continues to strengthen, and Delta's lead versus the industry continues to shrink.  Fear, fear, fear.