Eagle spin off?

[1AA]

Eagle spinoff announcement was made the same time as the big aircraft order. It looks like AA might get back into the markets that we gave to Eagle by utilizing the A319 and A320. There are cities that other carriers use A319 and A320 aircraft on the same ramp. If you figure all these new single aile aircraft plus what we already have in the inventory, it makes sense to get back in those markets. I see a big expansion in the future barring any REAL major financial issues. Eagle was a financial disaster but AA kept funding it. Interesting to see how or what form Eagle will be sold or spun off. Alone in its present form is not profitable.

 

[eolesen]

I think that AMR was using Eagle as a means to displace money from AA.

Gee, and all this time I thought it was being used to bust the unions....

If anything, as the analyst note mentioned, Eagle was set up to try and keep the money being spent for regional feed within AMR, as opposed to paying a third party like Simmons, Ransom, Wings West, Metro or Chapparal. That's why AMR took over all of those companies and folded them into Eagle.

As for your example... it's meaningless. Eagle doesn't set prices, nor are prices set based on distance. But you know that.

 

[Bob Owens]

Gee, and all this time I thought it was being used to bust the unions....

If anything, as the analyst note mentioned, Eagle was set up to try and keep the money being spent for regional feed within AMR, as opposed to paying a third party like Simmons, Ransom, Wings West, Metro or Chapparal. That's why AMR took over all of those companies and folded them into Eagle.

So outsourcing isnt always the best way.
Much the same way AA doesnt want to send their Maintenance to TIMCO, Aeroman and AAR, to keep from paying a third party providor.

As for your example... it's meaningless.

Whenever you say something is meaningless its usually because it doesnt bolster your position, so its meaningless to you and you dont want to discuss it.

Eagle doesn't set prices, nor are prices set based on distance. But you know that.

No AA sets them and by doing things like that they get to skew the numbers to make AA look uncompetitive to their Unionized workers. They throw numbers out at meetings to sell the arguement that we arent productive enough and we should not expect industry leading pay. In the example I discussed the guy was willing to pay what was needed to get to PHX and what he was willing to pay for was the part from NY to PHX, but AA showed most of the revenue as being driven on the first leg to NY which the guy would have driven if he could get the same price on the NY to PHX leg. In reality he bought the leg to New York to get the o legs from NY to PHX, the value was in the Ny to PHX leg. He could not just buy that leg of the trip, nor could someone who was in NY who wanted to make that part of the trip. However when AMR does their internal breakdowns of the numbers they show his ticket as an unprofitable one for AA, which they tell us about, and a very profitable one for the Eagle leg, which they dont really dive into.

Prices may not be set strictly by distance (they are for pass travel) but costs are broken down that way (one of your favorites CASMs)and thats how AA skews the numbers, in the end its all the same to AMR but tactics like this allow them to paint whatever picture they want to their labor unions. This little trick raises the CASMs and Lowers the RASMs for AA, which is then reported to the unions in PP slideshows through the graphs and charts that are impacted by those numbers.

To me the reason why they may be spinning Eagle off is they dont need it anymore, they have all that liability tied to the purchase new aircraft to paint a scary picture from now on. I can hear it now "Guys, AA has $80 Billion in debt and only $10 billion in assetts and $24 billion a year coming in. If the banks decide to call in their loans we're cooked".

 

[strikeforce]

No AA sets them and by doing things like that they get to skew the numbers to make AA look uncompetitive to their Unionized workers. They throw numbers out at meetings to sell the arguement that we arent productive enough and we should not expect industry leading pay. Prices may not be set strictly by distance but costs are broken down that way and thats how AA skews the numbers, in the end its all the same to AMR but tactics like this allow them to paint whatever picture they want to their labor unions.

Hey Bob, sort of like our level 6 in ORD telling the AMT's that 737 cargo door scratch repair costs would be charged to fleet instead of MX. It comes out of the same checkbook, doesn't it???? You gotta laugh, brother!!!

 

[Frank Szabo]

Hey Bob, sort of like our level 6 in ORD telling the AMT's that 737 cargo door scratch repair costs would be charged to fleet instead of MX. It comes out of the same checkbook, doesn't it???? You gotta laugh, brother!!!

The beauty of a large company is their accounting system - designed with numerous cubby holes fed from the same checkbook throughout the business to disguise what an incompetent group of management is doing.

 

[Frank Szabo]

Almost sounds like the US Government ...

Of course it does. Large entities cannot function otherwise.

 

[Flying low]

Hey Bob, sort of like our level 6 in ORD telling the AMT's that 737 cargo door scratch repair costs would be charged to fleet instead of MX. It comes out of the same checkbook, doesn't it???? You gotta laugh, brother!!!

The beauty of a large company is their accounting system - designed with numerous cubby holes fed from the same checkbook throughout the business to disguise what an incompetent group of management is are doing.

Similar to the household budget. One checking account, but the money is divided among different utility companies, gas for the car, food etc....

 

[Buck]

Similar to the household budget. One checking account, but the money is divided among different utility companies, gas for the car, food etc....

Yes, however there is usually only one CEO in household, the wife......

Our Level Six in TULE, says that no matter what happens, it's ok as long as you can explain it....

 

[Frank Szabo]

Similar to the household budget. One checking account, but the money is divided among different utility companies, gas for the car, food etc....

A very nice management-type rebuttal, but the bottom line is it's hidden (by the vast number of accounts) space to hide the many screw-ups of management types - you can characterize it in any way you wish but don't expect many of us to buy into your lies.

I'm getting quite a collection of "ignored" management stooges and union sympathizers and those who do not nor ever have worked in the airline industry who know it all - is there any danger of running out of space to ignore these SOBs??

 

[Frank Szabo]

The upgrades are filling the docks in TULE. You know the routine, OSMs and then Parts Washers/Aircraft Cleaners and transfers under Art. 12. , but we are short of people.

I'm glad to hear that - it would seem many are beginning to wise up to the busiiness and avoid it.

Byhaps by buying the throwaway Scarebus the airline can be run by management only, eliminating the lowlife vassels that think they have a right to a living wage.

 

[eolesen]

No AA sets them and by doing things like that they get to skew the numbers to make AA look uncompetitive to their Unionized workers.

So you think AA deliberately over-prices just to make you look uncompetitive? Or are they simply matching the prices set by the market. Yes, that concept that you hate to acknowledge when it comes to what the company wants to pay you, yet you think needs to be applied when it comes to what WN or UPS are earning this week...

In the example I discussed the guy was willing to pay what was needed to get to PHX and what he was willing to pay for was the part from NY to PHX, but AA showed most of the revenue as being driven on the first leg to NY which the guy would have driven if he could get the same price on the NY to PHX leg. In reality he bought the leg to New York to get the o legs from NY to PHX, the value was in the Ny to PHX leg. He could not just buy that leg of the trip, nor could someone who was in NY who wanted to make that part of the trip. However when AMR does their internal breakdowns of the numbers they show his ticket as an unprofitable one for AA, which they tell us about, and a very profitable one for the Eagle leg, which they dont really dive into.

Gee, Bob, you just discovered the first lesson in revenue management. Pricing isn't based on the flight segments you travel on. It's based on where you start, where you end, and how much the company thinks they can get you to pay based on years of experience.

Try to remember that the goal of pricing isn't to sell as many seats as you can, but instead is to charge the highest amount the market will bear. It's the exact opposite of employee pay, where the goal is to find the lowest hourly rate that most employees are willing to vote in....

In the real world, there's no such thing as taking a connecting fare and "only paying for what you use". This isn't wine by the glass or power by the hour.

Prices may not be set strictly by distance (they are for pass travel) but costs are broken down that way (one of your favorites CASMs)and thats how AA skews the numbers, in the end its all the same to AMR but tactics like this allow them to paint whatever picture they want to their labor unions. This little trick raises the CASMs and Lowers the RASMs for AA, which is then reported to the unions in PP slideshows through the graphs and charts that are impacted by those numbers.

They might be averaged by distance for analysis purposes, but unless something has changed, costs are not explicitly broken down by distance. My group developed the City Business Reviews which came out in 2005, and at least then, we never even tried to show a station or route specific CASM/RASM figure.

There are as many ways to show the fixed costs & local revenue at a station as there are ways to go fishing. If there's a lot of point to point traffic, you might be able just look at a couple factors, but when you're a network carrier, you also have to calculate an offset called "network contribution" so that when you're looking at stations who might not have a lot of point-to-point traffic, they get credit beyond just a distance based pro-rated value to help recognize the connecting revenue generated simply because you serve X city pairs beyond the hub(s).

I know. It's all smoke and mirrors, all made to confuse you and the unions into capitulation...

 

[Bob Owens]

So you think AA deliberately over-prices just to make you look uncompetitive? Or are they simply matching the prices set by the market. Yes, that concept that you hate to acknowledge when it comes to what the company wants to pay you, yet you think needs to be applied when it comes to what WN or UPS are earning this week...

Here we go, I must have struck a nerve. Like I said he asked if he could just buy the NY to PHX leg at the quoted rate, which you are trying to claim is the market rate but obviously its not, because he could not, he would have to pay much more, like a passenger from NY would have to pay. Spin away, nobody is buying it. If it was the market price then why couldnt he get it at the price quoted? Overprice no, shift the revenue, Yes. If the tickets were sold seperately by two different companies do you think Eagle would get more for their short leg that could be driven and competes with the train or bus than AA would get to bring them from NY to PHX? Maybe NY to LAX where there's a lot of competition but not NY PHX.

Try to remember that the goal of pricing isn't to sell as many seats as you can, but instead is to charge the highest amount the market will bear. It's the exact opposite of employee pay, where the goal is to find the lowest hourly rate that most employees are willing to vote in.

When AA factors their revenue for internal purposes tactics like this allow them to spin the numbers. A disproportonate value for the trip is attributed to the Eagle leg which nobody would pay. I could care less about all that other stuff you threw out there to muddy the waters.

In the real world, there's no such thing as taking a connecting fare and "only paying for what you use". This isn't wine by the glass or power by the hour

He realized that he just didnt understand why the flight was broken down like that to him.

They might be averaged by distance for analysis purposes, but unless something has changed, costs are not explicitly broken down by distance. My group developed the City Business Reviews which came out in 2005, and at least then, we never even tried to show a station or route specific CASM/RASM figure.

CASMs and RASMs are what they use to make their case to the Unions. I could care less what or how you used data.

 

[eolesen]

Just pointing out facts, which I know don't serve your purposes well at times.

The fact is that how a fare break-point or a pro-rate is done for pricing has absolutely no correlation to how costs are allocated internally.

Put more simply.... oh, why even bother. You're right, Bob. AA simply shifted the costs to Eagle in direct proportion to how much revenue they got.

In markets like PHX-BOS where connecting in NYC is less than flying PHX-NYC, there's absolutely no cost to operate the connecting flight. Really. It's free.

 

[Bob Owens]

Just pointing out facts, which I know don't serve your purposes well at times.

The fact is that how a fare break-point or a pro-rate is done for pricing has absolutely no correlation to how costs are allocated internally.

Put more simply.... oh, why even bother. You're right, Bob. AA simply shifted the costs to Eagle in direct proportion to how much revenue they got.

In markets like PHX-BOS where connecting in NYC is less than flying PHX-NYC, there's absolutely no cost to operate the connecting flight. Really. It's free.

I think I've just seen what an on-line hissy fit looks like.

Did I say BOS?

I'm not biting but he still cant explian why the much shorter Eagle leg was valued at so much higher of a price than the longer Ny-to PHX part. The company calls it revenue management, more like three card monty.

 

[eolesen]

I'll keep it simple:

Limited supply = higher prices. High supply = lower prices.


Ever go shopping for a part to keep your 20 year old Datsun running, and find out you're paying three times as much as you would for the same part on a 5 year old Toyota Celica?

Same concept. Limited supply, and you'll pay whatever you have to in order to keep being the patron martyr of odometer-philes.

How about shopping around for a generator the day before a hurricane hits, or right after? I'll guarantee that if you truly need one, you'll pay whatever Home Depot or Ace is extorting from you, even if it's double the normal asking price.


Flying on those short segments is no different. Your long-haul market probably has no less than six or seven alternative airlines available over multiple hubs. Your yet to be disclosed short-haul market? If they're extracting a premium, it's probably only one or two choices. And that means they can charge almost anything they want because they know the business travelers are going to pay it.


Put into terms even you can't dispute: it's the same as what you've been saying about experienced line mechanics in high cost of living areas being able to extract a premium once your labor shortage hits, versus what a MRO is going to pay for the privilege of working for a chop-shop and living next to PTO in a Mobile or Greensboro trailer park...


Hissy fit? Hardly. Slow news day, and it beats pulling wings off of flies.