Honey we are in bankrupcy lets spend

[amtide]

Honey we are in bankrupcy throw your old clothes, we are getting new clothes. Lets paint our vehicles and order new custom made. Lets change our furniture also. Love bankrupcy.

Where all the money is coming? The nailed employees? Does AA worry that M&R group has the lowest percent of approval of all groups? Do not think so.

 

[Glenn Quagmire]

Honey we are in bankrupcy throw your old clothes, we are getting new clothes. Lets paint our vehicles and order new custom made. Lets change our furniture also. Love bankrupcy.

Where all the money is coming? The nailed employees? Does AA worry that M&R group has the lowest percent of approval of all groups? Do not think so.

Huh?

 

[FWAAA]

Apparently, the OP would prefer that management file for bankruptcy, slash wages and benefits, and then NOT order new modern fuel efficient planes in an attempt to finally become profitable. Like many employees, the OP mistakenly assumes that the bankruptcy was filed so that AA could go on its buying spree. But the bankruptcy was going to happen regardless of the new planes. Look at the other airlines, like UA, CO, DL, NW, US and HP. All have used bankruptcy to slash wages and benefits (some of them multiple times) and not all of them have ordered over 500 new planes.

As to the crappy new livery and the ridiculous decision to paint the existing planes (and not just the new ones, which come painted at no extra cost), I agree with the OP. Painting existing shiny aluminum planes is a waste of fuel and money.

 

[chris perry]

Isn't too much debt what bankrupted AA? In ten years we have have 20+ year old 737's,777's and debt on 500 new airplanes.Delta on the other hand is buying used airplanes at 1/4 of the cost, something don't don't add up? Bankruptcy every 10 years? Unprecedented airplane order = huge debt.Explain the logic? The big fancy house mentality seldom prevails.

 

[TWU informer]

Isn't too much debt what bankrupted AA? In ten years we have have 20+ year old 737's,777's and debt on 500 new airplanes.Delta on the other hand is buying used airplanes at 1/4 of the cost, something don't don't add up? Bankruptcy every 10 years? Unprecedented airplane order = huge debt.Explain the logic? The big fancy house mentality seldom prevails.

No Bankruptcy was the only means to get rid of the pensions after the 2003 lies and subsequent years of management bonus awards. Chapter 11 laws and ability to shaft the employees at will out weighed the negatives of bankruptcy.

 

[AA-MRO.COM]

Lets buy all the pilots and First officers new IPADS this way we can save tons of money on fuel no more kit bags. Then we can throw a few hundred pounds of paint on the shiney new aluminum so that the flying public will buy tickets. Utter maddnes I want my money back :angry2:

 

[Glenn Quagmire]

As to the crappy new livery and the ridiculous decision to paint the existing planes (and not just the new ones, which come painted at no extra cost), I agree with the OP. Painting existing shiny aluminum planes is a waste of fuel and money.

I agree with your livery assessment. I would like to see some marketing survey data that shows any correlation between the look of an aircraft exterior and the sale of a ticket.

I do understand that the livery is part of the entire marketing package, and that one piece may not be measurable in the sense of the entire brand looking fresh and new.

I will venture a guess that the frugal consumer does like a nice looking aircraft on the inside, coupled with a pleasant customer contact experience. However, they will sacrifice some of that for a cheap ticket.

I remember when NWA did the "2000 Interior" mods on the 35 year old DC-9's. The average consumer had no idea that that fresh "new" aircraft on which they were flying could have been built by their grandparents.

 

[FWAAA]

Isn't too much debt what bankrupted AA?

Not really. AA didn't have very much unsecured debt (the kind of debt you can unload in Ch 11). AA did have a fair amount of secured debt (secured by airplanes) and most of that debt remains. Some of it has been reduced to reflect the lower value of the airplanes, but most of it remains.

AA filed for Ch 11 so that it could use the hammer of 1113 to force more efficient contracts on the employees, primarily thru work rule concessions. In Ch11, you either agree to concessions or the judge permits the company to impose them. The pilots resisted and were the first group of pilots among the legacy carriers to have their contract abrogated.

In ten years we have have 20+ year old 737's,777's and debt on 500 new airplanes.Delta on the other hand is buying used airplanes at 1/4 of the cost, something don't don't add up? Bankruptcy every 10 years? Unprecedented airplane order = huge debt.Explain the logic? The big fancy house mentality seldom prevails.

AA's earliest 738s and 777s will be 14 years old next month, and by ten years from now, some of them may be due for retirement.

The new airplanes are all about fuel cost. Right now, with fuel at $3.20/gal, the fuel savings of a new 738 (compared to the MD-80 it replaces) more than pays the lease payments on the new 738. Add in the maintenance savings (at least for the first 5-6 years) and the new 738 adds to profits. Unless, and this is a big one, unless fuel prices decline. If fuel prices drop, then AA's massive gamble will backfire and it will end up with higher costs than the competitors who have moved more slowly to replace their fuel hogs.

Yes, DL is buying every available MD-90 and is taking the FL 717s off WN's hands (at great expense to WN). Great deal for DL. Of course, DL has also ordered 100 739ERs which Anderson (DL CEO) said would add to DL's profits in their first year. How? Lower fuel burn plus maintenance savings. It's not just me who's been saying that fuel efficient planes pay for themselves, even the Anderson the Great of Almighty Delta has said the same thing. And DL has a lot of older fuel inefficient planes that will eventually need replacement, like its huge fleet of 763s and 757s plus its 747s and a fairly large pile of MD-88s. Delta is going to order more new planes - the supply of used 717s and MD-90s is not very large. UA is in the same boat - an aging fleet (the CO side was young, the UA side was old and getting older by the day).

If fuel costs drop, AA's gamble doesn't look so good. But if fuel costs climb, you don't want to be the airline left holding the old fleet bag, and that's where AA was in 2005 with over 300 MD-80s, 34 AB6s, 15 762s and over 100 757s. Fuel costs spiked and AA handed the oil companies many multiples of your concessions.

Fuel is very expensive, but have you noticed the cost of money? Interest rates are very, very low. It's impossible to hedge fuel 20 years into the future, but if you lock in favorable lease terms on new fuel efficient planes for 20 years, that's sort of similar to hedging fuel for the long term. Basically, you can burn fuel or you can burn money buying/leasing new planes so that you don't burn as much fuel. Neither choice is all that ideal, but that's the reality facing airline management. Fuel cost AA $0.55/gal in 1998 and 1999 and yet it cost AA $3.20/gal last year. That's an increase that's almost six-fold. Fuel went from being a pesky annoyance like airport rent to being the largest single expense at AA. I'm not smart enough to know if the 500-new-plane plan will succeed, but what other realistic choice is there? If fuel costs double (let alone grow by six times) in the next 14-15 years, efficient planes are a necessity.

AA was going to file for bankruptcy protection no matter what. It was only a matter of time. But having done so, is it better to muddle along with its old fuel inefficient fleet and hope that fuel prices drop or is it better to implement a plan to deal with high fuel prices? The re-fleeting plan may not work, but not buying new planes would be a plan certain to fail.

 

[Tex-Mech]

According to this link, all the money is going to the pilots. Where is the me too clause now? http://aviationblog....anuary-2013.pdf

 

[Kev3188]

I agree with your livery assessment. I would like to see some marketing survey data that shows any correlation between the look of an aircraft exterior and the sale of a ticket.

I do understand that the livery is part of the entire marketing package, and that one piece may not be measurable in the sense of the entire brand looking fresh and new.

I would like to see a cost/benefit analysis of the livery change vs. market recognition of the old logo(s) of each carrier that has repainted as part of coming out of BK.

And yes, I get that there are a ton of moving parts to it, but still...

Fuel is very expensive, but have you noticed the cost of money? Interest rates are very, very low. It's impossible to hedge fuel 20 years into the future, but if you lock in favorable lease terms on new fuel efficient planes for 20 years, that's sort of similar to hedging fuel for the long term. Basically, you can burn fuel or you can burn money buying/leasing new planes so that you don't burn as much fuel.

That's actually a pretty good way to look at it. Or rather, an angle people don't often take...

 

[Bob Owens]

Apparently, the OP would prefer that management file for bankruptcy, slash wages and benefits, and then NOT order new modern fuel efficient planes in an attempt to finally become profitable. Like many employees, the OP mistakenly assumes that the bankruptcy was filed so that AA could go on its buying spree. But the bankruptcy was going to happen regardless of the new planes. Look at the other airlines, like UA, CO, DL, NW, US and HP. All have used bankruptcy to slash wages and benefits (some of them multiple times) and not all of them have ordered over 500 new planes.

Yep maybe BK was inevitable, after all paying for planes, equipment and facilities you dont use doesnt make sense, but why did they do just that for 10 years and then file? Wouldnt they have saved a lot by doing that back in 2003? Seems to me that the owners of those asstts got a free ride, no wonder that Bank tried to see if they could still collect interest on monies that were already returned to them.

As for the paint jobs, well thats simply somebody else getting their share of the spoils.

 

[PA28-180]

Not really. AA didn't have very much unsecured debt (the kind of debt you can unload in Ch 11). AA did have a fair amount of secured debt (secured by airplanes) and most of that debt remains. Some of it has been reduced to reflect the lower value of the airplanes, but most of it remains.

AA filed for Ch 11 so that it could use the hammer of 1113 to force more efficient contracts on the employees, primarily thru work rule concessions. In Ch11, you either agree to concessions or the judge permits the company to impose them. The pilots resisted and were the first group of pilots among the legacy carriers to have their contract abrogated.



AA's earliest 738s and 777s will be 14 years old next month, and by ten years from now, some of them may be due for retirement.

The new airplanes are all about fuel cost. Right now, with fuel at $3.20/gal, the fuel savings of a new 738 (compared to the MD-80 it replaces) more than pays the lease payments on the new 738. Add in the maintenance savings (at least for the first 5-6 years) and the new 738 adds to profits. Unless, and this is a big one, unless fuel prices decline. If fuel prices drop, then AA's massive gamble will backfire and it will end up with higher costs than the competitors who have moved more slowly to replace their fuel hogs.

Yes, DL is buying every available MD-90 and is taking the FL 717s off WN's hands (at great expense to WN). Great deal for DL. Of course, DL has also ordered 100 739ERs which Anderson (DL CEO) said would add to DL's profits in their first year. How? Lower fuel burn plus maintenance savings. It's not just me who's been saying that fuel efficient planes pay for themselves, even the Anderson the Great of Almighty Delta has said the same thing. And DL has a lot of older fuel inefficient planes that will eventually need replacement, like its huge fleet of 763s and 757s plus its 747s and a fairly large pile of MD-88s. Delta is going to order more new planes - the supply of used 717s and MD-90s is not very large. UA is in the same boat - an aging fleet (the CO side was young, the UA side was old and getting older by the day).

If fuel costs drop, AA's gamble doesn't look so good. But if fuel costs climb, you don't want to be the airline left holding the old fleet bag, and that's where AA was in 2005 with over 300 MD-80s, 34 AB6s, 15 762s and over 100 757s. Fuel costs spiked and AA handed the oil companies many multiples of your concessions.

Fuel is very expensive, but have you noticed the cost of money? Interest rates are very, very low. It's impossible to hedge fuel 20 years into the future, but if you lock in favorable lease terms on new fuel efficient planes for 20 years, that's sort of similar to hedging fuel for the long term. Basically, you can burn fuel or you can burn money buying/leasing new planes so that you don't burn as much fuel. Neither choice is all that ideal, but that's the reality facing airline management. Fuel cost AA $0.55/gal in 1998 and 1999 and yet it cost AA $3.20/gal last year. That's an increase that's almost six-fold. Fuel went from being a pesky annoyance like airport rent to being the largest single expense at AA. I'm not smart enough to know if the 500-new-plane plan will succeed, but what other realistic choice is there? If fuel costs double (let alone grow by six times) in the next 14-15 years, efficient planes are a necessity.

AA was going to file for bankruptcy protection no matter what. It was only a matter of time. But having done so, is it better to muddle along with its old fuel inefficient fleet and hope that fuel prices drop or is it better to implement a plan to deal with high fuel prices? The re-fleeting plan may not work, but not buying new planes would be a plan certain to fail.

I get buying new planes but 500,seems excessive and irresponsible.

 

[WorldTraveler]

The difference between AA and what DL is doing w/ its 739ER order is that DL is only ordering as many aircraft as it can pay for while STILL reducing its debt.... in other words, they are not adding to their long-term debt by taking on new aircraft. AA will have the most leveraged balance sheet in the history of US aviation - perhaps worldwide. How very American.

The 717s are balance sheet positive when you pull off DCI contracts. Any new aircraft DL obtains in the next few years will solely be to help DL get rid of 50 seaters.

You don't need to worry about whether you have the newest, most fuel-efficient aircraft if you have pricing power - and don't allow competitors into your markets and retain the power to price your product. The reason why DL will be the last airline in the US to operate aircraft w/ fuel burn like the M80 is because the M80 is the backbone of DL's business market short haul fleet up and down the east coast. DL keeps competitors out of its markets - or w/o the ability to grow - and can price their product so they can make a profit, even w/ the high fuel costs of the M80.

 

[AAviator]

According to this link, all the money is going to the pilots. Where is the me too clause now? http://aviationblog....anuary-2013.pdf

Me too left the building. You now get what ever your leverage allows for.

 

[FWAAA]

The difference between AA and what DL is doing w/ its 739ER order is that DL is only ordering as many aircraft as it can pay for while STILL reducing its debt.... in other words, they are not adding to their long-term debt by taking on new aircraft. AA will have the most leveraged balance sheet in the history of US aviation - perhaps worldwide. How very American.

Making good on your debts is overrated. As many here have observed, CH 11 has become a business strategy, not a last-ditch solution.

You don't need to worry about whether you have the newest, most fuel-efficient aircraft if you have pricing power - and don't allow competitors into your markets and retain the power to price your product. The reason why DL will be the last airline in the US to operate aircraft w/ fuel burn like the M80 is because the M80 is the backbone of DL's business market short haul fleet up and down the east coast. DL keeps competitors out of its markets - or w/o the ability to grow - and can price their product so they can make a profit, even w/ the high fuel costs of the M80.

Maybe so, but DL doesn't enjoy pricing power systemwide. DL's 2012 mainline yield was 14.88 cents per mile, while AA's mainline yield was 14.83 cents per mile. While DL had a slight edge (5/100 of a cent per mile), those numbers are functionally equivalent. Each airline apparently has routes that print money and each airline has losers where money is burned in large quantities.

AA's strategy may not work; that's what I posted in this thread earlier. Unlike you, I'm not convinced which strategy will turn out better over the long term. However, I do know one thing: there aren't enough available MD-90s and 717s for AA to attempt to duplicate the Richard Anderson strategy, and that's why AA is taking the only other possible alternative, and that is to replace its aging fleet with new fuel efficient planes.

As I posted the other day, that refinery's contribution to profits can't come soon enough - Delta paid six cents more per gallon for fuel in 2012 than did AMR, and that six cents saved AMR a total of $163 million on fuel compared to Delta's 2012 price.