Doug Parker's Letter to employees

[AA89]

In addition to the 33.3% voting power the the unions have, how much will cooperative/happy unions be able to influence the other creditors?
Or do you guys think the other 6 creditors will base their decisions solely on the financial aspects of AAs plan?

 

[USFlyer]

Delta emerged from Ch 11 as a "standalone entity," and that's clearly what WT was talking about.

I responded to the statement about how history has shown that DL was better off as a standalone entity. History doesn't show this, though, given DL merged with NW very shortly after emerging from bankruptcy.

 

[chris perry]

777/767/757,

The problem with AA's term sheets,they are so bad,its a much better deal.To merge or get a buyout from anyone. Jack in the Box will have better benefits and holidays than the new Horton AA. So why would anyone support Horton here labor wise?

 

[FWAAA]

In addition to the 33.3% voting power the the unions have, how much will cooperative/happy unions be able to influence the other creditors?
Or do you guys think the other 6 creditors will base their decisions solely on the financial aspects of AAs plan?

It's not quite that simple; it's not like the nine members of the Supreme Court, each with one vote, where a 5-4 decision means that side wins.

To win confirmation, a plan of reorganization has to get the votes of "at least one-half in number and two-thirds in dollar amount of claims actually voting in each impaired class of claims have voted to accept the plan."

In other words, the larger your claim (the amount AA is proposing to stiff you), the more votes you have. Each unsecured creditor gets to vote on a POR, not just the nine representatives who make up the official unsecured creditor committee.

 

[WorldTraveler]

DL was out of BK for 15 months - 5 quarters - before the acquisition of NW closed. Even though 2008 saw a huge spike in jet fuel prices, by the time DL merged with NW, DL broke even on an operating basis excluding merger related items while the rest of the network carrier segment was deeply in the red, including a billion dollar operating loss by US in the same first nine months of 2008.
.
Yes, it is absolutely true that DL fared better as a standalone and it certainly fared better than US.
.
And AA's creditors DO NOT know the outcome of whether AA will be better as a standalone or not because the BK process is not complete - and AA is a long ways from gaining alot of the benefits it could get in BK.
Parker wants to terminate the BK process for AA quickly, settle for alot less reductions than AA could otherwise get, and then gain the revenue benefits from a half restructured company WITHOUT the creditors, AA mgmt, or AA employees seeing any other alternative, including that AA's standalone plan might generate higher returns for one or all groups.
.
Even if AA's labor unions suffer far greater job losses under the AA standalone plan, the creditors are far more likely to support that plan or one which entails deeper cuts because it will better position AA to compete.

AA's unions are looking for diminished job cuts while ignoring the likelihood that the new AA - standalone or with US - will end up unable to compete and be back in BK for a third round or be liquidated resulting in a loss of far more jobs.

.
And to FWAAA's point, the less job cuts labor takes, the lower will be their claims - and the more power the non-labor creditors have in deciding which plan is best for AA.
AA labor gets a LARGER piece of the new AA - and a greater say in its future - by taking larger cuts in BK.

 

[DCaf]

While I understand your frustration and completely agree that AA mgmt wasted the advantage they gained with the 2003 concessions and then spent 8 years trying to “peacefully” get more while the industry around AA changed, history shows that the vast majority of employees will show up for work even after the pay cuts. And because the majority of AA’s labor costs are based on cutting heads and benefits and altering productivity rules, the majority of the AA people who stay will be more likely to believe it is worth their while to stick it out than to leave.
People are far more likely to revolt against direct pay cuts than to benefit and productivity cuts – which is why AA is trying to minimize the salary cuts to the employees who remain.
Of course, their philosophy is completely contrary to what unions want which has been to retain lots of employees even if they are lower paid… but as benefits costs continue to rise, it is no longer feasible to keep hundreds of extra employees at the company and trade it for salary cuts.
The sole reason why the unions are so aggressively supporting US’ takeover proposal is because Parker is promising to reduce the number of lost jobs – and thus further weaken the unions.
The majority of employees will show up the day and the week and the month after the 1113 cuts are imposed and benefits and productivity are slashed…. When there is somewhere between 15-20% unemployment in the US (depending on whose calculations you believe tell the real story), the majority of employees are not going to give up a job without knowing something better is in the bag.

But here is the rub… AA has those high value passengers right now throughout its network… US has them only in its Eastern hubs – DCA, PHL, and CLT… but US doesn’t do well in competing for high value passengers outside of its eastern hubs against larger airlines.
So, AA employees would be giving up the premium revenue passengers that are the backbone of AA’s business plan to share them w/ US who hasn’t been able to generate them on their own.

No one should doubt that DL is in a position and will move to acquire AA if it has to – and if it does make a proposal, it will be able to show that it can generate superior returns to the creditors and for the employees. Like it or not, but DL is a larger airline that already is more like AA than AA is like US… thus adding key pieces of AA’s network to DL’s will create more benefits for the combined airline than will happen with AA/US.
.
More on revenue later, but everyone (including Parker) want to forget that the Dept. of Justice made it fairly clear that it will not allow US to acquire any more slots at DCA – so if US acquires DCA, it will be forced to operate AA’s routes from DCA using US’ existing slots while the remainder of AA’s slots – dozens of flights per day – will end up in the hands of a competitor – and possibly a low fare carrier like WN that could easily eliminate all of the potential merger benefits by reducing fares.
.
It has been suggested several times that DL would be in a worse position or be viewed as more hostile but several articles suggest that DL is already working w/ non-airline US based investors who would be able to facilitate a sale of the overlapping parts of the DL-AA networks in NYC – where overlap would be problematic – to another airline.
We could debate all kinds of scenarios about what AA-DL would look like but i am certain that DL could come up with a superior deal for all parties to what US could propose and still not run into the anti-trust issues which a lot of people think would stop DL participation in a deal.
And there would still be other offers that would come, including likely from BA/IAG partnered with domestic investors.
.
And of course the unions haven’t seen any other deal to know if it they would make sense or be superior to US’.
.
And it also doesn't change the fact that US has not demonstrated that it can provide a better deal - or even a workable one - superior to AA"s standalone plan. All US has done is promised that it will reduce the labor cuts AA is proposing but US has not even begun to demonstrate how they will do that.... and all kinds of evidence indicates they are making promises they cannot keep.

Call your superiors and have them submit a proposal. Easy, for an airline so capable and powerful.

 

[FWAAA]

AA's unions are looking for diminished job cuts while ignoring the likelihood that the new AA - standalone or with US - will end up unable to compete and be back in BK for a third round or be liquidated resulting in a loss of far more jobs.

Agree with just about everything in this post. AA employees, of course, have hated AA management for a long time, and Parker's overtures have given them a very prominent platform on which to publicly rebuke those hated AA managers. Nothing new here at all. Many AA employees (not including or limited to the several dozen who post here) are still in denial about how grim AA's future is if it does not achieve substantial reductions in operating costs, and Parker has given them yet another excuse to put off the day of reckoning. Arpey himself tried to put it off for more than eight years, and failed.

 

[TWU informer]

Agree with just about everything in this post. AA employees, of course, have hated AA management for a long time, and Parker's overtures have given them a very prominent platform on which to publicly rebuke those hated AA managers. Nothing new here at all. Many AA employees (not including or limited to the several dozen who post here) are still in denial about how grim AA's future is if it does not achieve substantial reductions in operating costs, and Parker has given them yet another excuse to put off the day of reckoning. Arpey himself tried to put it off for more than eight years, and failed.

Everytime we enter negotiations, AA has a grim future and we give concessions.

And regardless of how many times we assist them, the grim future always returns.

How many times must the employees bail the mismanaged idiots out only to quickly return to a grim future?

I am ready for a different approach and I am willing to risk everything to give another management group a chance.

The merger is the only hope we have of replacing the stooges that keep leading down the path of grim futures.
You can stand in denial that we want new management all you want, but there actually is "something new" in the merger option.
I am not interested in a simple rebuke.
I am interesting in the idea of New Management and Hope for a change.
Not more of the same failed plan.

 

[WorldTraveler]

DCaf,
at the appropriate time, competitive bids will come... just because Parker has decided to play a run around the BK process doesn't mean others will. They will act if it is appropriate to do so and at the appropriate time.
.
Yes, FWAAA,
AA labor is not much different from Eastern in their denial of how grave the situation is and how badly things need to change in order to turn AA around... and the fact that Parker is willing to play on that denial in an attempt to build a house which can't stand after it is feverishly thrown together is only setting AA employees up for yet another fall.
.
Informer,
I understand your frustration...but running from one mgmt team that didn't fix problems to another than hasn't and won't be able to is not the answer.

 

[TWU informer]

Informer,
I understand your frustration...but running from one mgmt team that didn't fix problems to another than hasn't and won't be able to is not the answer.

Again, you maybe correct, but I have funded via concessions the current plan too many times.

I am willing to risk everything on another plan, idea, or chance.

I am not willing to continue the same plan once again expecting a different result.
Unless you come and work where I do, watch the lower and middle management muddle in their ignorance and inaction on items we provide them that would make a difference, then you can never "understand my frustration".

Come and walk a few days in my shoes, then I might believe that you understand.

 

[DCaf]

DCaf,
at the appropriate time, competitive bids will come... just because Parker has decided to play a run around the BK process doesn't mean others will. They will act if it is appropriate to do so and at the appropriate time.
.
Yes, FWAAA,
AA labor is not much different from Eastern in their denial of how grave the situation is and how badly things need to change in order to turn AA around... and the fact that Parker is willing to play on that denial in an attempt to build a house which can't stand after it is feverishly thrown together is only setting AA employees up for yet another fall.
.
Informer,
I understand your frustration...but running from one mgmt team that didn't fix problems to another than hasn't and won't be able to is not the answer.

Wow, 3 insults in 3 paragraphs. Your posts are starting to sound a little hysterical. But don't worry, if DL gets control of AA, your job will be safe. Too bad the same can't be said about the poor AA employees who will be shredded by your Delta masters.

 

[Frank Szabo]

I responded to the statement about how history has shown that DL was better off as a standalone entity. History doesn't show this, though, given DL merged with NW very shortly after emerging from bankruptcy.

Delta and Northworst had every intention of a merger BEFORE they BOTH filed for bankruptcy.

 

[WorldTraveler]

Frank,
Yes, we all recognize that DL and NW's BKs were planned w/ the intention of a future merger - which ended up happening.
DL and NW both emerged independently and maintained profitability despite the fuel price spike in 2008. They were not committed to a merger and likely would not have merged if either one had failed to maintain its post-BK financial performance.
It doesn't change the fact that AA has to be able to emerge as a viable standalone airline in order to be a viable partner for anyone. Parker wants to short-circuit the restructuring process, grab AA, and then deal with the fact that the new airline won't be viable by taking another trip thru BK later.
That's not a risk AA people should take.

DCaf,
sorry if you find the truth to be insulting. It is still the truth.
I do not work in the airline industry - my job will not be affected by whatever happens to AA, DL, or US.

Again, you maybe correct, but I have funded via concessions the current plan too many times.

I am willing to risk everything on another plan, idea, or chance.

I am not willing to continue the same plan once again expecting a different result.
Unless you come and work where I do, watch the lower and middle management muddle in their ignorance and inaction on items we provide them that would make a difference, then you can never "understand my frustration".

Come and walk a few days in my shoes, then I might believe that you understand.

I can appreciate your position without walking in your shoes....
I am NOT saying you should continue w/ the same old, same old.... you are clearly smart enough to know that repeating the same thing expecting different results is the definition of insanity.
If you believe that walking away from it all and shutting the place down after the 1113 process is forced upon you is what you need to do - and if you find enough people to join you - then you should follow through on your convictions. AA still has alot of assets and someone will buy those assets and take alot of employees with them.
I am simply saying that you and other AA employees are setting yourself up for another fall if you believe that US mgmt's plan will solve AA's problems and avoid further cuts.

 

[TWU informer]

Frank,
Yes, we all recognize that DL and NW's BKs were planned w/ the intention of a future merger - which ended up happening.
DL and NW both emerged independently and maintained profitability despite the fuel price spike in 2008. They were not committed to a merger and likely would not have merged if either one had failed to maintain its post-BK financial performance.
It doesn't change the fact that AA has to be able to emerge as a viable standalone airline in order to be a viable partner for anyone. Parker wants to short-circuit the restructuring process, grab AA, and then deal with the fact that the new airline won't be viable by taking another trip thru BK later.
That's not a risk AA people should take.

DCaf,
sorry if you find the truth to be insulting. It is still the truth.
I do not work in the airline industry - my job will not be affected by whatever happens to AA, DL, or US.



I can appreciate your position without walking in your shoes....
I am NOT saying you should continue w/ the same old, same old.... you are clearly smart enough to know that repeating the same thing expecting different results is the definition of insanity.
If you believe that walking away from it all and shutting the place down after the 1113 process is forced upon you is what you need to do - and if you find enough people to join you - then you should follow through on your convictions. AA still has alot of assets and someone will buy those assets and take alot of employees with them.
I am simply saying that you and other AA employees are setting yourself up for another fall if you believe that US mgmt's plan will solve AA's problems and avoid further cuts.

AA Management Plan = More of the Same
US Management Plan = More of the Same

My vote is to take my chances on US Management.

AA Just wants to rape and pilferage the employee benefits and payscales, then get the financing to take over US themselves.

The merge of the two is going to happen now or happen later. I want nothing to do with funding more AA Management ignorance and foolish bean counter ideas that elminate the human factor of employee contribution and only has focus upon the almighty dollar.

Cutting the heads and paying and treating well those that are left would be the best idea. Works well and Southwest.
But the Union and the Goverement seem to believe that the Airline must be the "jobs program of the United States".
Not enough work to keep them all, and the making everyone miserable is just wrong.

I vote go ahead and do it now.

 

[MCI transplant]

Agree with just about everything in this post. AA employees, of course, have hated AA management for a long time, and Parker's overtures have given them a very prominent platform on which to publicly rebuke those hated AA managers. Nothing new here at all. Many AA employees (not including or limited to the several dozen who post here) are still in denial about how grim AA's future is if it does not achieve substantial reductions in operating costs, and Parker has given them yet another excuse to put off the day of reckoning. Arpey himself tried to put it off for more than eight years, and failed.

<_< ------ FWAAA, you still don't get it! What the Unions are telling you, and AA Management, is that you've already come to a point where the job is no longer worth it!!! They are already on the raged edge, and are trying to salvage what is left of what was once a great future. Any further reductions will result in the same thing AA is trying to avoid, and will only put AA back into BK two, or three, years down the road asking to be bailed out once more! -------- A company simply can not survive on the backs of it's employees !!! ----From someone who's been there!