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Credit Defaults on AMR soar to nearly 3X levels af industry

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  • #61
I am not attacking AA but simply wanting to cronstructively discuss the issues around AA's financial situation.
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As I noted, the appearance of terminals is subjective and there is evidence that fancy terminals don't necessarily deliver solid finances nor do "poor" facilities necessarily mean that airlines will suffer.
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I agree that the new train at DFW has dramatically improved connectivity at the airport and has overcome alot of the barriers that existed to AA running a multi-terminal operation - from a passenger standpoint.
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But it doesn't change that AA's facilities are spread out over a larger area than probably any for any other airline at any airport in the US and that does come with a certain degree of inefficiency.... bags still have to be transported throughout the airport, maintenance has either long response times to fix problems or duplicate sets of parts hve to be maintained in multiple locations, etc....
What is the cost of all that inefficiency... hard to measure but it certainly exists... and when numbers show AA employees being less efficient than other carriers, the facility certainly bears some responsibility.
By the same token, AA is greatly improving its efficiency at MIA w/ the new teminals... it is not just about nice looking facilities for passengers. At JFK, DL supposedly has calculated that they are spending so much on security personnel who have to watch all of the doors that had to be put up because the airport wasn't built for the current security environment that they can pay a significant part of the cost of a new facility -along w/ other efficiencies.
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The point is that facility costs which are long term investments can help to offset shorter term operating costs. AA has designed those cost efficiencies into its other terminals as have other carriers at their largest hubs but AA is left w/ some major inefficiencies at DFW.
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BK can't fix all of that inefficiency but it could potentially allow AA to renegoiate some contracts that might reduce some of the the costs of airport operations - and I'm not talking about pay cuts for its own employees.
 
I don't dispute that AMR has some difficult issues to navigate through in the near future. However I do find it odd that they just invested for a 25% ownership in Mexicana??

mistified
 
I don't dispute that AMR has some difficult issues to navigate through in the near future. However I do find it odd that they just invested for a 25% ownership in Mexicana??

mistified

That depends......USD or Pesos?
 
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nothing has been announced and it will have to be if it happens because it is a material event for AMR....
$50M is chump change for AMR... that is not the issue... the question is what they get for it and the amount of a credit they have to provide to Mexicana. Given that AMR is already highly leveraged and just took on more debt in the past quarter to keep their cash levels high, adding hundreds of millions of debt to AMR's balance sheet won't help.
 
nothing has been announced and it will have to be if it happens because it is a material event for AMR....
$50M is chump change for AMR... that is not the issue... the question is what they get for it and the amount of a credit they have to provide to Mexicana. Given that AMR is already highly leveraged and just took on more debt in the past quarter to keep their cash levels high, adding hundreds of millions of debt to AMR's balance sheet won't help.
What's 50M when they just added 1.5B to their debt? Bottom line....worthless mismanagement! Arpey and his stooges need to go!
 
The $500M/$50M to Mexicana appears to have no credibility... AMR has apparently denied it according to the Dallas Morning News, and it never went beyond the stories in the Mexican press.
 
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and we're surprised that AA saw no value in a small share of an upstart Mexican airline that will have to compete against a well operating legacy and a host of LFCs -plus all of the US carriers?
The fact that AMR just took on 1.5B more debt just to ensure they won't have to get nasty with labor as an affront to their revenue generating problems might be part of the reason they don't have the resources to deal with strategic opportunities.
 
and we're surprised that AA saw no value in a small share of an upstart Mexican airline that will have to compete against a well operating legacy and a host of LFCs -plus all of the US carriers?
The fact that AMR just took on 1.5B more debt just to ensure they won't have to get nasty with labor as an affront to their revenue generating problems might be part of the reason they don't have the resources to deal with strategic opportunities.

Then AA needs to settle contracts if they wish to deal with those "stategic" opportunities!
 
I really don't think AA will pass up opportunities based on the status of labor contracts.
 
You can't compare the two, Frank. What you agree to for labor costs has to be looked at thru a different lense than a shorter term expenses like investment in another airline or capital improvements. You can always write off a bad investment. You can't write off labor.
 
You can't compare the two, Frank. What you agree to for labor costs has to be looked at thru a different lense than a shorter term expenses like investment in another airline or capital improvements. You can always write off a bad investment. You can't write off labor.

E., apparently AA has.....
 
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Not according to WT's post which I was responding to.
no company wants to be sidelined during key strategic movements in the industry but all of them have financial limits. The MX opportunity if it had been true would have come at the signfiicant cost of requiring AMR to tie up a lot of credit it could not afford to part with.
At that kind of price, the deal was too rich or too risky for AMR.
There will be significant merger and acquition as well as investment opportunities in the global industry - and those will likely be heightened after the current fuel crisis passes. But no carrier can risk its core business on investments that could bring down the company.
A look back to now-defunct Swissair will show the danger of investing in weak companies in the hope of building something strong.
 
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