Chapter 11 or 7?

[cmkeane]

** Really not flamebait *** If AA is forced into BK court, I am wondering those more knowledgable than I if you think AA will be able to work a chapter 11 filing?
It seems if the bombs start falling, and God forbid anything happens in Korea, that would put major hurt on UA and U, and obviously AA and many others would likely be eyeing BK court fairly seriously. However, in this climate, if most carriers are in or about to go into BK court, do you think there is sufficient financing available out there to provide sufficient DIP to get through the process? Since all the airline assests are so badly leveraged, I am not totally sure how workable DIP terms would be readily available in case of a rush to court, which sadly it looks like AA is poised to go with its current cash burn rate and apparently tepid response from the unions.

 

[AAmech]

This is one reason I think AA will go Chap 11 very soon unless the unions stun the world and actually act quickly. AA has enough cash of its own to restructure without outside help right now. And a big part of the restructuring is already done. They're not going to wait till they're down to 1bil and desperate for outside finanacing before they pull the trigger.

 

[Andy S.]

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On 2/9/2003 258 PM cmkeane wrote:

** Really not flamebait *** If AA is forced into BK court, I am wondering those more knowledgable than I if you think AA will be able to work a chapter 11 filing?

It seems if the bombs start falling, and God forbid anything happens in Korea, that would put major hurt on UA and U, and obviously AA and many others would likely be eyeing BK court fairly seriously. However, in this climate, if most carriers are in or about to go into BK court, do you think there is sufficient financing available out there to provide sufficient DIP to get through the process? Since all the airline assests are so badly leveraged, I am not totally sure how workable DIP terms would be readily available in case of a rush to court, which sadly it looks like AA is poised to go with its current cash burn rate and apparently tepid response from the unions.

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Any initial filing will be Chapt 11. After that is anyone's guess.

As far as labor's "tepid" response, please keep in mind that until last week, Management had not yet presented a cost target to the various unions. AMR still has not yet presented a plan to reach those numbers. You can't be tepid to something that you haven't seen yet.

Andy S.

 

[AV8NSIGO]

I don't know that this article will shed any light on the issue.

In a late December, 2002 issue of Business Week, an article (printed as an open letter) indicated there was a greater possibility of UAL liquidating through Chpt. 7 than USAirways doing so. I don't know the author, or anything about his/her credibility.

It did make for interesting reading. The author's premise was that USAirways dealt with high overhead for a longer period of time and the employees knew it. When Siegel approached them for pay/benefit concessions, they already knew he was coming and wondered what took him so long.

Another factor was the presence of the Alabama Retirement/Pension (I don't remember the exact name) Fund. They were able to force a change of mind at both groups (management & labor).

What/who would play a similar role if AMR files Chapter 11?

 

[Winglet]

This is classic management tactics. Hold your fire until there's a plausible emergency, then SCREAM like hell that you've got to have HUGE GIVEBACK IMMEDIATELY or the world falls apart. This is classic stampeed tactics, laced with fear grenades and whipsawing. Right out of the union busting playbook. All the managements see this as their big chance to bust the unions, and they're going to make hay while the sun shines.

BTW, do you think that if the unions give management everything they want, that in a couple of years when the economy recovers and the national airline system is caught with woefully short capacity, that ticket prices and profits won't go through the roof? And there will be the unions at the doorstep, cup in hand, and management will say "a contract is a contract, boys." I guess that only applies when it's advantagous to Carty, Mullins, Anderson, Tildon, Siegel, et al.

 

[planemech669]

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On 2/9/2003 9:06:35 PM Winglet wrote:
.....
BTW, do you think that if the unions give management everything they want, that in a couple of years when the economy recovers and the national airline system is caught with woefully short capacity, that ticket prices and profits won't go through the roof? And there will be the unions at the doorstep, cup in hand, and management will say "a contract is a contract, boys." I guess that only applies when it's advantagous to Carty, Mullins, Anderson, Tildon, Siegel, et al.
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Unfortunately I don't think we are going to see any kind of fabulous market recovery like we saw in the early to mid nineties this time. There is too much capacity (look at the 30% to 40% 2 week bookings for this year compared to 50% to 60% for this time of year in 2001) and the profit margin of an airline is too low to begin with. Another thing to look at is the cost of getting to the airport alone has gone up dramaticly over the last month. With a gallon of gas going anywhere from 1.50 to 1.90 and up here in DFW alone, even the malls are hurting.
With war looming ominously on the eastern horizon, people are putting off the spending and saving for the nessecities of life rather than the flurtive vacation they were thinking of taking last year. Now, with even the minor spending being put off by consumers, do you really think things are going to get better soon? Typicaly the air travel industry lags 3 to 8 months behind the rest of the world. So when you see the economy improve and things begin to level out again, wait another 6 months after that to see how the airlines are doing.

The changing done by the survivors is going to be permanent Winglet, once you're out you're out.
Darwinism in it's purest form, survival of the fittest = survival of the species.

 

[AAmech]

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On 2/9/2003 9:06:35 PM Winglet wrote:

BTW, do you think that if the unions give management everything they want, that in a couple of years when the economy recovers and the national airline system is caught with woefully short capacity, that ticket prices and profits won't go through the roof? And there will be the unions at the doorstep, cup in hand, and management will say "a contract is a contract, boys." I guess that only applies when it's advantagous to Carty, Mullins, Anderson, Tildon, Siegel, et al.
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[/blockquote]

I also doubt there will be any big recovery. This is why its advantagous go negotiate NOW before BK. We have the ability to craft 2 or 3 year deals just in case something miraculous does happen. If we wait untill BK, we'll get a 6 year deal rammed down our throat!!