Fitch cuts AMR's and AA's debt ratings

[Itestwell]

China traffic (PRC & Hong Kong) has been holding up pretty well compared to the rest of Asia - up 17.8% through November. South America has also been holding up pretty well - up 12.7% through November.

Jim

Really? I wonder why so many airlines asked to postpone their China services last round? They know something we don't?

Cathay Pacific posted a record 1.1B loss for 2008.... what gives? Fuel prices alone?

http://www.iht.com/articles/ap/2009/03/11/...hay-Pacific.php

From the article:

"The outcome is deeply disappointing," said Cathay Chairman Christopher Pratt. "Having made a painful adjustment to high fuel prices, the aviation industry now has to adjust to a severe economic downturn."

 

[Delta Technician]

Here's some good news... I guess when airlines (in this case DL) announce capacity reductions, and other airlines hint at it (AA), the market gets a bit happier!

http://www.bloomberg.com/apps/news?pid=206...&refer=home

He who adjusts fastest survives longest.

 

[BoeingBoy]

Cathay Pacific posted a record 1.1B loss for 2008.... what gives? Fuel prices alone?

I should have been more clear - those were China-USA traffic increases. Flights to the USA make up a small portion of Cathay's routes. Also, the latest numbers are for Nov 2008 and show slowing growth. It's entirely possible, even likely, that the slowdown has continued but until the numbers come out we just don't know. At any rate, as far as the numbers that are available China-USA traffic is one of the better performing - the Middle East, South America, and Africa to USA are the others.

Also, you keep referring to AA filing "one week" after US to postpone start of service. US filed their motion on 5/27/2008 (before the traffic declines started) and AA filed theirs on 9/4/2008 (after it became obvious that the world economy was heading south and after the China-USA traffic increases started to decline).

Jim

 

[FrequentFlierCA]

One of the reasons I argue against "restore and more" for the work groups is that I don't want to see AMR get caught in a liquidity squeeze. The credit crisis is far from over, and companies in industries with far brighter prospects than airlines are having a hard time raising money. With AMR's debt rated as junk, how is it going to have the cash flow to meet these obligations while substantially increasing its payroll? It's like watching a train wreck in slow motion.

 

[FA Mikey]

Its simply not going to happen. Anyone work group who believes they will be getting a substantial pay raise soon, is living in a dream world.

 

[Itestwell]

Also, you keep referring to AA filing "one week" after US to postpone start of service. US filed their motion on 5/27/2008 (before the traffic declines started) and AA filed theirs on 9/4/2008 (after it became obvious that the world economy was heading south and after the China-USA traffic increases started to decline).

Jim

Meh. Weeks, months. No matter. Point was the hilarity of the matter after AA'ers on here said that US should lose their rights, blah blah blah... At least they figured it out, albeit behind US, and many other carriers....

So since traffic is up to China as you state, could that mean they are heavily discounting the seats from the USA? People over on the CO FT board are boasting about $800 fares on the new EWR- PVG services. Might these fares be why China is seeing a traffic increase?

And, if traffic is growing, am I right in assuming it is not the PREMIUM traffic (F/C cabins) that airlines depended on for so long? I just don't get why airlines aren't scrambling to add back delayed (and reduced) China services if they are doing so well?

 

[AAflygirl]

Its simply not going to happen. Anyone work group who believes they will be getting a substantial pay raise soon, is living in a dream world.

I hate to agree with this (since it affects me directly) but I think you're right. Right now I am focused on hunkering down to ride this storm out. I wish I had more, but I really don't know what I would do without my income. This is by far the worst time in my career to be negotiating.

 

[FA Mikey]

Meh. Weeks, months. No matter. Point was the hilarity of the matter after AA'ers on here said that US should lose their rights, blah blah blah... At least they figured it out, albeit behind US, and many other carriers....

Wow a few posts back the "ONE WEEK" thing was so pivotal to the argument. You stated it over and over. As though it all happened at about the same time. Turns out it was several months difference. Now you seem to imply usair was able to foresee the fall off before anyone else. Before it even began to happen. Which is amazing when you figure they have no transpacific flying and that they knew before the two pacific power house's UAL and NWA. Thats why they couldnt fly the route. It had Nothing to do with the lack of suitable AC.

So since traffic is up to China as you state, could that mean they are heavily discounting the seats from the USA? People over on the CO FT board are boasting about $800 fares on the new EWR- PVG services. Might these fares be why China is seeing a traffic increase?

If one airline, filing some extra seats on its one flight to mainland China, it whats tilting the scales we should be afraid. But then we all know that is not true. As for 800 dollars, have you ever heard of a thing called a SALE? It where companies take a perishable commodity and price it to sell. Sometimes its to build revenue, sometimes to drum up business, sometimes its to grab market share.

And, if traffic is growing, am I right in assuming it is not the PREMIUM traffic (F/C cabins) that airlines depended on for so long? I just don't get why airlines aren't scrambling to add back delayed (and reduced) China services if they are doing so well?

Continental Airlines to Inaugurate Nonstop New York-Shanghai Service Wednesday March 25.

 

[Itestwell]

Wow a few posts back the "ONE WEEK" thing was so pivotal to the argument. You stated it over and over. As though it all happened at about the same time. Turns out it was several months difference. Now you seem to imply usair was able to foresee the fall off before anyone else. Before it even began to happen. Which is amazing when you figure they have no transpacific flying and that they knew before the two pacific power house's UAL and NWA. Thats why they couldnt fly the route. It had Nothing to do with the lack of suitable AC.

Again, one week one month, I didn't bother to check , and it matters not. AA'ers were sooo quick to pounce on pathetic USAir, only to do the same MONTHS (not weeks, sorry!) later.... Shall we try to find the thread? It's HILARIOUS!!!

You're assuming US did not fly the route simply because of a lack of suitable aircraft.. I am simply expressing my opinion that US decided to cancel the A340s and delay the flight because of the deterioration of the Chinese economy. Period. Did US have information AA didn't? Doubt it. I just do not think they delayed the flight because of a lack of equipment. There were (are) a good amount of A340s on the market, no? They even offered pilot pay rates for the A340. Obviously A340's wouldn't have been the most economical aircraft, but it would have allowed them to start the flight, if it still looked as lucrative as when they applied for the service. As far as NWA and UAL being powerhouses, I agree! US was starting a lonely Asian route in a time when they saw the economy faltering. Not smart. They decided to delay before the two powerhouses. The two powerhouses already had an established premium traffic stream. US did not.

If one airline, filing some extra seats on its one flight to mainland China, it whats tilting the scales we should be afraid. But then we all know that is not true. As for 800 dollars, have you ever heard of a thing called a SALE? It where companies take a perishable commodity and price it to sell. Sometimes its to build revenue, sometimes to drum up business, sometimes its to grab market share.

Why are they offering sales if traffic/ revenue is so strong? They have been advertising the market for quite awhile now.. Why the sales? Will you not agree that the economic environment has changed since CO was awarded the route?

Continental Airlines to Inaugurate Nonstop New York-Shanghai Service Wednesday March 25.

True, but why then did AA/NWA/UAL/US delay in the first place, if China is seeing such an upsurge of traffic? Why did DL reduce ATL- PVG to 4x/week? My guess is that the upsurge is not premium traffic... Don't you agree?

 

[BoeingBoy]

All I can say is that for March 2008, the month before US filed to postpone the start of PVG service, China-U.S. traffic was up over 29% year over year. By July, the month before AA filed to postpone start of service, the YoY growth had dropped to 11.3%. While not specific to the China-U.S. market, overall Asia-U.S. traffic growth had dropped to about zero in June and turned negative in July.

Of course, all that has nothing to do with US' stated reason for postponing the start of the PVG service. That was fuel cost - as I'm sure you know, the A340 that US proposed using isn't the most fuel efficient in that size range (on a per ASM basis) and fuel was heading for it's peak in early July when US asked to be allowed to postpone service. As US said in it's motion, "No carrier, however, including US Airways, could have anticipated the rapid and extreme increase in fuel prices that the airline industry has experienced since the United States and China's May 2007 aviation agreement."

As for US' foresight, well...I'll just quote some more from the motion to postpone start of service - "There is no sign that fuel prices will decrease significantly in the foreseeable future." Of course, 3 months later fuel priced did start their decline, eventually dropping below $40 per bbl of oil.

AA filed it's motion to defer start of service citing economic conditions and the prior approval of deferred startup to US, UA, CO, and DL.

As for fare sales, the yield data trails the traffic data. It's certainly likely that the traffic has continued dropping since November, resulting in fare sales. Just take a look at some of the deals US is offering - DUB for as low as $272 round trip, Brussels for as little as $298 R/T, TLV for $1199 R/T with 5,000 elite miles.

Jim

 

[FA Mikey]

Don't you agree?

Nope

 

[Itestwell]

All I can say is that for March 2008, the month before US filed to postpone the start of PVG service, China-U.S. traffic was up over 29% year over year. By July, the month before AA filed to postpone start of service, the YoY growth had dropped to 11.3%. While not specific to the China-U.S. market, overall Asia-U.S. traffic growth had dropped to about zero in June and turned negative in July.

Of course, all that has nothing to do with US' stated reason for postponing the start of the PVG service. That was fuel cost - as I'm sure you know, the A340 that US proposed using isn't the most fuel efficient in that size range (on a per ASM basis) and fuel was heading for it's peak in early July when US asked to be allowed to postpone service. As US said in it's motion, "No carrier, however, including US Airways, could have anticipated the rapid and extreme increase in fuel prices that the airline industry has experienced since the United States and China's May 2007 aviation agreement."

As for US' foresight, well...I'll just quote some more from the motion to postpone start of service - "There is no sign that fuel prices will decrease significantly in the foreseeable future." Of course, 3 months later fuel priced did start their decline, eventually dropping below $40 per bbl of oil.

AA filed it's motion to defer start of service citing economic conditions and the prior approval of deferred startup to US, UA, CO, and DL.

Jim

Fair enough. US saw that the flight would be unprofitable, and they acted accordingly. I'm sure that AA found fuel costs concerning as well?

 

[Itestwell]

Nope

So explain how DL reducing PVG to 4x/ week and CO offering "sale fares" is a good thing.

 

[FA Mikey]

So explain how DL reducing PVG to 4x/ week and CO offering "sale fares" is a good thing.

Delta I dont know, could be EQ shortage, could be people dont want to fly all the way to ATL and change planes in that nightmare, could be many things. As for CAL, it can tbo too sorry a situation, they are adding a NEW flight to mainland China next week.Now if they were losing there shirts, would they be starting service to a new city in China? Just because you see a sale doesnt mean there not getting enough preminum traffic to make the flight profitable.

 

[Itestwell]

Delta I dont know, could be EQ shortage, could be people dont want to fly all the way to ATL and change planes in that nightmare, could be many things. As for CAL, it can tbo too sorry a situation, they are adding a NEW flight to mainland China next week.Now if they were losing there shirts, would they be starting service to a new city in China? Just because you see a sale doesnt mean there not getting enough preminum traffic to make the flight profitable.

Is ATL more of a nightmare than ORD? hmm... toss up.. :huh:

So if you see a sale, that means they are discounting the route out of the kindness of their hearts? It means that the premium traffic is there, but they choose to discount? I don't follow your logic....

You can book EWR- PVG for $315 each way on the CO website. I found a few dummy bookings for EWR PEK in June for ~$798....I'll bet they wish they delayed PVG....