Has It Started?

[NewHampshire Black Bears]

Though moving all domestic flying to AE has been AMR's "rumored strategy" for years, remember that there are large groups of represented employees that would have to be dealt with. Think AA/TWA, then think about how do you merge AE and AA flight attendants and pilots.

Granted there are relatively few "senior mamas" at AE, but there are some. And, considering the unwillingness of a large number of AA f/as to "give up even 1 digit of my seniority," a merger of the two seniority lists would not be a cakewalk. And, they are represented by different unions with their own agendas.

Operaations, don't automatically assume that AE is an in-house LCC. The starting pay for an AE flight attendant is currently $17.67/hr (or thereabouts), and their new contract is under negotiation even as we speak. After not quite 3 years at AA, at the time of my furlough, I was making $22.10/hr. That's a difference of only $332/mo gross for a 75 hour month between a 1st day f/a and a 3 year flight attendant. And, at AA there weren't all that many of us making that little.

As recalls continue to happen, you have only 708 furloughees left that are making near the bottom of the scale, then you have approx. 4,000 f/as making top of scale (former TWA) to recall before you get back to f/as making near the bottom of the scale. A merger of AA and AE would have to take the AA furloughees into account or the lawsuits would never end. {Hell, who am I kidding? If there were a merger of the lists, I would not be happy if AE flight attendants with only 1 or 2 years were still flying while I was on furlough.} Plus, you have some former TWA flight attendants currently flying at AE who were "junior" to me on the AA Seniority List. To paraphrase the song...I smell a mess coming on! (Consider that if the July refusal rate of 20% becomes the new norm, there are only 565 furloughees above the most senior former TWA f/a!)

This, of course, is all conjecture at this point. We haven't even addressed the pilot situation--some pilots furloughed at both companies while some furloughed at one are working at the other. Oy Vey! And, there is the little issue of getting all the AA and AE a/c combined on one certificate, plus cross-training the entire domestic f/a corps--upwards of 20,000 when you combine AA and AE--on all the different a/c.

[post="183926"][/post]​

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jimntx,
As USUAL, excellent counter points !!!

I realize this is a "stretch", but I've got a feelin' that the majority(50.00001%) of union AAers would find A/E haulin' more domestic, while mainline fly's the "gravy", as opposed to another round of concessions and possible BK-11, MORE palatable.

(Jim, I fully realize that a scenario like this, would in fact be a concession for some mainliners)

While sittin' here retired and gettin' too fat, I will NEVER lose my Union hard line !!!!

However I think "something" un-orthodox(SP?) could be near.

Hey, like everything else at AA,
Only time will tell !!!

Regards,
NH/BB's

 

[jimntx]

While sittin' here retired and gettin' too fat, I will NEVER lose my Union hard line !!!!

However I think "something" un-orthodox(SP?) could be near.
Regards,
NH/BB's

[post="183937"][/post]​

Spelling is fine, though the hyphen is unnecessary. Now, drop and give me 10. Then get the heck out of the house and jog 5 miles. We do not want to lose your supportive posts.

 

[LaBradford22]

DFWCC, you are jumping to conclusions. Is there a path out there (continued high fuel prices, DL gets concessions from ALPA, UA is able to shed its pensions and emerge from bankruptcy with lower costs, US somehow stays afloat with lower costs, etc) that would drive AA back to the brink of bankruptcy and more concessions? Yes.

But that's at least a year, maybe two years, down the road. A lot can happen (and likely will happen) between now and then.

Oil is now close to $48 per barrel, I'm guessing it will stabilize in the $40, maybe $35 range, in the next couple of years. A lot of people don't realize this - but for fuel prices, AMR would be well in the black right now (in spite of weak revenue).

Speaking of revenue, DL pulling out of DFW is a huge win (at least in the short-term) for AA. I personally don't see any way US gets out of the mess that they're in, both financially and with their labor. I see them as a >50% chance of chapter 7 at this point in time. That would be a win for all of the other survivors in the industry.

I don't know what the heck to make of UA right about now. Their pension is a staggering $8 billion (that's BILLION with a B) underfunded. How are they going to get exit financing with that looming over their heads? The answer is they aren't. So, yes, you might want to worry a little bit about your future pension benefits (the company can't take away benefits you have already accrued). If you have a defined benefit pension (and most if not all Union employees of AA do), you might want to plan on those benefits being frozen (and probably replaced with something else) in the next year or so. I agree with you there.

Back to revenue - if UA comes out of bankruptcy smaller, that is a unique benefit to AA, since the two have competing hub ops at ORD.

There are several paths that AA could go down. What is unnerving, admittedly, is that much of what happens depends on external factors (i.e. fuel price, what competitors end up doing, economic recovery, etc) that we have no control over. But I would say, at this point, the likelihood of good things happening is greater than the likelihood of the necessary conspiracy of bad things happening that would drive AA back to the brink of bankruptcy and to the negotiating table for round two of concessions. Who knows? In another year or two, we may be trying to figure out how much our next profit sharing check is going to be.

Just my humble (yet honest) opinion.

 

[AAmech]

Forget about that "Rumor" of AE taking all the domestic flying. Passengers barely tolerate RJ's! DL got clobbered at DFW trying to use RJ's to compete with AA's MD80's and 737s. It doesn't work.

 

[LaBradford22]

Forget about that "Rumor" of AE taking all the domestic flying. Passengers barely tolerate RJ's! DL got clobbered at DFW trying to use RJ's to compete with AA's MD80's and 737s. It doesn't work.

[post="183954"][/post]​

Interesting point.

The best (or at least, the most effective) scope protection that pilots may have in the new airline environment is simply passenger preference.

 

[jimntx]

I don't know what the heck to make of UA right about now. Their pension is a staggering $8 billion (that's BILLION with a B) underfunded. How are they going to get exit financing with that looming over their heads? The answer is they aren't.

[post="183944"][/post]​

Good points, but have you seen the UAL filing with the bk court? They want to dump the pensions, but they are claiming that the PBGC is not telling the truth. The filing states that the underfunding is NOT $8billion; it's only $2.7billion. :blink:

 

[jimntx]

Forget about that "Rumor" of AE taking all the domestic flying. Passengers barely tolerate RJ's! DL got clobbered at DFW trying to use RJ's to compete with AA's MD80's and 737s. It doesn't work.

[post="183954"][/post]​

Interesting point.

The best (or at least, the most effective) scope protection that pilots may have in the new airline environment is simply passenger preference.

[post="183957"][/post]​

But, that is not really an issue. What we are talking about is that ALL AA a/c except the widebodies (and maybe the 757s) would go to AE, or ALL AE a/c moving over to domestic AA.

That's why it would be such a mess to make it work with SCOPE clauses, and seniority lists, and cross-training, etc.

 

[FWAAA]

Oh.......My.......God!

Hell must have frozen over, because I agree with almost everything NHBBs says in this thread!

AA isn't in the clear yet, but the black clouds that US and UA can't seem to shake aren't forming over AA.

DL is teetering on the brink of disaster because of its extremely high flight deck costs. Sure, the pilots will blink - but will they do it in time? We'll see.

And the point about CO is a very good one. It is a highly leveraged house of cards. Been to Ch 11 twice, could easily find its way there once more.

NW is asking for concessions. Will it get them?

Which large airline has already funded (as of June 30) its entire 2004 defined benefit plans' required minimum contributions? If you guessed AA, you are correct. $461 million by June 30, with another $450 million or so due in 2005. An easily managable expense, thanks to AA's positive cash flow. Anyone realize that AA's plan is the least underfunded of the legacy airlines? That goes a long way toward survivability.

With AMR's revenues in the first half of 2004 an amazing $900 million more than the first half of 2003, the recovery has already begun. Although the hurricanes will depress revenue in Q3, I still see AMR's revenue nearly $2 billion more than last year. That part of the recovery plan is working. And with AA's costs down more than $3 billion since 2002, AA is on track to survive and maybe even thrive for a few more years.

UA's yields remain depressed, while AA's yields (already 1.5 cents more than UA's yields) are stabilizing.

And the LCCs? Only WN is in the clear and that is only because of their fortuitous gamble (as Arpey said yesterday) on the price of fuel. Had WN not placed those wagers, fuel would be killing them. And if fuel would have fallen to $20/bbl instead of rising thru the roof - then WN would have a much smaller advantage over everyone else.

And B6? The bloom is off that rose. Everyone hyped it like the second coming. Then investors started to realize what all that deferred maintenance would do to its costs. And the fact that their yield has fallen ever since September 11 and continues to fall 10% each year without stopping. Their yield is now almost lower than WN's costs. Think that is sustainable? No way in hell.

Add in Neeleman's moronic decision to become a complex carrier by adding a different fleet type: Looks like he didn't study the WN playbook completely. Although B6 is well-capitalized, it has lots and lots and lots of debt on its hands thanks to all-new airplanes. Factor in terrible yields, a workforce that will someday want more money, higher maintenance bills in the years to come, and it is entirely possible that B6 will flameout. Just like so many before it.

And the point about RJs? As others have just pointed out, pax will not forever tolerate cramped small airplanes for long flights. No way. If WN flies 737s, there is no way people will pay the same (or more) to a legacy carrier to sit on a 37 or 44 or 50 or even 70 seat RJ. No way. No f'ing way. Short connecting flights? Ok. Lots of 2 or 3 hour mid-con flights? Nope. Not to mention the ill-effects the proliferation of RJs has had on airport and ATC congestion.

Back to pensions for a moment: One thing DFWCC and other "pensions are doomed" critics aren't taking into account is that even WN spends a LOT of money on its stock options, 401k matching contributions and profit sharing. Even if AA did eliminate the pensions and replaced them with 401k matching contributions and profit sharing (copied the WN plan) - the cost to AA might easily approach $400 million or $500 million each year. Since AA's DB pension costs this year were $461 million and are expected to be $450 million next year, where is the savings if the plans were eliminated?

One last thing about the pensions: If interest rates rise some more (like everyone agrees they will) and if the stock market continues its slow improvement (like most think it will), then AA's DB plans won't be underfunded at all.

The only reason that the DB plan is underfunded is because of the decline in stock prices and the unprecedented collapse in interest rates, killing the earnings on the plans' assets. Interest rates go up, not only will retired Floridians cheer (as their CDs return a living wage) - but pension plan managers and participants will celebrate too.

 

[WingNaPrayer]

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I realize this is a "stretch", but I've got a feelin' that the majority(50.00001%) of union AAers would find A/E haulin' more domestic, while mainline fly's the "gravy", as opposed to another round of concessions and possible BK-11, MORE palatable.

All right, who are you and what the hell have you done with the Bear??? h34r:

 

[fix_airplanes]

Nightly Business report-PBS

09/23/04: One On One With Julius Maldutis, President of Aviation Dynamics

JEFF YASTINE: United Airlines today reported it lost $56 million last month due to lower fares and higher fuel costs. Wall Street analysts widened their forecast for financial losses at American Airlines` parent company AMR (NYSE:AMR) today and tomorrow, U.S. Airways may ask a bankruptcy court to force concessions from the carrier`s labor unions. These developments are adding yet more turbulence to an already rocky airline industry and joining me now to discuss these developments is Julius Maldutis, longtime airline analyst and president of the consulting firm Aviation Dynamics. Julius, welcome back to NIGHTLY BUSINESS REPORT.

JULIUS MALDUTIS, PRESIDENT, AVIATION DYNAMICS: Thank you, good evening.

YASTINE: Let`s talk about U.S. Airways for a second. They`re already in bankruptcy. They want to force more wage and benefit concessions from their unions, let`s suppose they get those concessions. Does that really help U.S. Airways in their competitive position?

MALDUTIS: It will only be temporary. I believe that USAir is in deep financial trouble. I think they made a strategic mistake in reducing their hub at Pittsburgh which is going to just multiply their losses. So I think it`s one of the first carriers that`s going to be liquidated by this time next year.

YASTINE: So you say one of the first carriers you`re expecting not just these sorts of bankruptcies where they continue to operate. You`re expecting more liquidations where the assets of the entity are sold off entirely.

MALDUTIS: Absolutely. Just look back at what happened in the early 1990s when three airlines were liquidated, Pan Am, Eastern and Braniff and set the stage for the industry`s recovery.

YASTINE: What are the names that you think are candidates for liquidation? I think I can guess them, if you`re saying U.S. Airways, United is already in bankruptcy and Delta (NYSEAL) is threatening bankruptcy.

MALDUTIS: Well, very good question. The critical question is that if Delta joins the other two carriers in bankruptcy, then the remaining three airlines: American, Continental (NYSE:CAL) and Northwest (NASDAQ:NWAC), in order to maintain cost parity, will also have to file bankruptcy and once in bankruptcy, then I think it`s going to be a free-for-all how many of these carriers really come out of financial reorganization and how many get liquidated. I would guess that again, two or possibly three airline will be liquidated by this time next year.

YASTINE: Does that mean then that the discounters, the Jetblues (NASDAQ:JBLU) and Southwest (NYSE:LUV) - they`re the winners and we all just sort of walk away from this or is there any future yet left for these legacy airlines or what`s left after these liquidations go through?

MALDUTIS: What`s left is they`re going to be very competitive, very strong and they will give the low cost airlines -- the Jetblues, Southwest, the AirTrans (NYSE:AAI), the Spirits who today are leading the industry and they are part of the problem in that they are charging very low fares. So if the legacy airlines can reorganize in bankruptcy, then they can make a go of it and compete with the low cost airlines.

YASTINE: What`s going on here with the legacy airlines? It seems like no matter what happens if there is just a minor tick in the economy, all sorts of chaos happens and they wind up in bankruptcy again like we see with U.S. Airways. Is it all about fuel costs and squeezing the unions for yet more wage and benefit concessions?

MALDUTIS: I`d like to say labor is not the problem but labor unfortunately has to be the solution to the problem. The problem is that the low cost airlines today constitute about 30 percent of the industry. They offer rock bottom fares because they have the lowest cost, they have the most productive employees and the legacy of full network carriers have to change and the only way they`re going to change is if either labor assists them or they will end up going into Chapter 11 and the judge will then do it.

YASTINE: Would you be buying the discount airlines here?

MALDUTIS: No, I would not because I believe that when we get additional carriers that go into bankruptcy, they will be able to compete successfully against the low cost companies. I would not own any airline shares today.

YASTINE: All right. Julius, we appreciate your time with the program.

MALDUTIS: Thank you.

 

[Boomer]

We tried to get the TWU guys to listen last "negotiations." The TWU International claimed that bringing AE/TWU into any Universal Settlement would be a DFR violation. We claimed that failure to actually work towards a settlement that worked was a DFR violation.

We recommended the following steps:

1) Combine the TWU AA and AE Employees on a one-for-one, ala Air Cal, on the Seniority lists by Title Group.

2) Push all the MD-80's, approximately 33% of the fleet, down to AE wages along with 33% of the total workforce, by job code, along with the aircraft.

3) Move all the heavy MX to MCI, one fleet-one overhaul base-one payscale.

4) Take all the "profit-sharing" and "stock-options" distributed among all AA Employees and distribute them ONLY to the 33% affected.

5) Freeze the pension accruals, but not the Company time towards retirement, for the 33% affected.

You get 250 something ships to fly at wages below the LCCs but with sufficient "contingent" income, profit sharing/stock options, to more than compensate for the gap. Structure the profit sharing and stock options into some sort of defferred compensation so that some portion is vested into the retirement while the time is counted towards same.

You get an overhaul base with experienced employees that are located in a central point within the US working a single ship-economies of scale.

At the point that the MD-80's begin to require replacement, allow the 33% to vote on whether they want to "cross-over" the fence back to mainline with a new 737-800 on percentage basis independant of ANY labor agreement, ie...at 25% of MD-80 replacement, a vote is scheduled for the Employees directly affected.

Mainline Heavy MX has to bid against MCI as the pendulum tilts towards efficiency. Contingent Income creates a bias towards efficiency and productivity while percentage votes among a larger peer group blunt the abilility of any one organized labor group to holdout for unwarranted increases in compensation.

Making the agreement independant of labor contracts gets you outside the usual BS between Unionized and Non-Unionized Employees and the RLA- that was the first and fatal strike against the deal.

Now that Maldutis and others within the financial community are preaching a return to the concessions table; will the TWU broker a deal that has the potential to actually return AMR as a force to be feared, or, will existing habits and attitudes force us to follow the herds to the slaughter?

I've been elected, more than once, to positions of leadership within the TWU, and been appointed to lead a team within the International...I'm now TWU free and loving it.

W-04

 

[WorldTraveler]

Folks,
stop the presses. DL's pulldown of DFW is anything but good news for AA. AA loved having DL co-hubbing at DFW because DL tied up a bunch of gates and kept LCCs from moving into a very competitive market. In case you missed it, DL has already said it will promptly return about 20 gates to DFW for reassignment to other carriers. Those gates, DFW's huge revenue base and high fares, and more than adequate runway capacity make AA's hub a very attractive target for LCC growth. With all the capacity AirTran and JetBlue have, they are strong possibilities. Southwest is not likely to let some out of town upstart horn into its action, however, so WN might show up at DFW w/ or w/o another LCC. DFW could look attractive to alot of other LCCs as well. Given the 25% RASM drop seen in other LCC invaded markets, an LCC incursion at DFW could be worth at least $1B in lost revenue to AA.

MIA is in the same position as is the Caribbean. AA is very vulnerable to further LCC growth. Ironically, DL and UA are close to reaching LCC saturation in their biggest markets.

UA's continued downfall is good news for AA but it is also anything but certain that US' assets will end up on the open market to be acquired by anyone. It is far more likely that US will be repackaged into an outside controlled LCC (such as Virgin) with its key asset base relatively intact. Besides, if AA really wants to put a world of hurt on CLT, all they have to do is plop a couple dozen more RJ's and a few mainline jets back into RDU and CLT will never be usable as a hub again.

Based on AA's first round of bankruptcy threats and the process DL is going through, AA's unions are not at all likely to get serious about giving anything up until AA burns through about a billion and a half of the cash it current has on hand.


It's a bit premature to be looking for major concessions from AA employees. Don't forget also that AA's pensions are in relatively good funding pension relative to DL and UA. Part of the reason DL is reaching deep for concessions is because they know they will have major pension obligations for a number of years to come. Given that Delta has historically been much more productive than AA or UA, DL can probably handle a higher debt load while AA will benefit from revenue diversion as UA continues to fail.

 

[Fly]

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[LiveInAHotel]

Do you believe the $hi! you type?

[post="184218"][/post]​

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[Garfield1966]

......