Honey we are in bankrupcy lets spend

[WorldTraveler]

Paying your debts is overrated? Wow. This from the person who argued for years that it was honorable to protect the stockholders. So it is ok to walk away from debt but not equity holders which are at risk? Really?

You do realize that you really don't walk away from debt anyway unless the company is dissolved? If the company intends to reorganize, debt is swapped for equity.

would you let us know where you found the figure regarding DL's mainline yield for 2012?

DL doesn't release its mainline only revenue information in its quarterly filings - which is all they have provided so far for 2012. They release consolidated revenue information only.

In fact, the 14.83 and 14.53 both came from AMR's financial statements and represent quarterly and 12 month results.

OOPS.

I could go on about how disappointed in you and how you have deceived and manipulated numbers but I won't do that because I recognize that it is easy to mix numbers up - even for those who intend to be honest, which is exactly what I believe you intend to be. A data error... that's all.

I've never said AA doesn't have a lot of very strong revenue markets... that's precisely why carriers are encroaching into AA markets.

You should probably look at the CASM info as well as specific market info to see where the problem is. And it is well worth remembering that it wasn't too many years ago that DL was at a severe disadvantage to AA and UA WRT revenue. Not so much anymore. DL's vastly improved revenue directly explains why AA's advantage relative to DL has diminished. Add in that DL has long had lower costs than AA and UA and hasn't lost that advantage, and it isn't hard to see why overall financial performance at DL is moving ahead of AA and UA.

And for the most recent quarter, AA's non-fuel, no specials CASM was 8.58 compared to 8.45 for DL. IN the quarter when AA's costs should have bottomed out, AA still has a higher CASM than DL - and DL is saying they will get another billion dollars in costs out in 2013... as much as AA got out from labor in 2012.

Yes, there are only so many used aircraft that AA could tap - but the reason why DL is doing it is because there is a glut of low priced narrowbody aircraft on the market. DL also expects that the same glut will hit the widebody market in the next few years as 787 and 350 deliveries worldwide ramp up - and as a few airlines start failing.

Yep, the refinery has yet to break even and DL spent about $20M subsidizing the refinery, net of hedge gains. DL noted that the refinery was still ramping up when Sandy hit and the cripped infrastructure in the NE meant the refinery could not distribute products.

Nonetheless, DL says they continue to believe the refinery deal was correct and that they are going to begin tests using domestic Bakken crude.

It still remains that if the refinery produces as intended, DL will gain an advantage of 2-3% in total costs - a pretty significant advantage which so far no other carrier has figured out how to duplicate.

 

[FWAAA]

would you let us know where you found the figure regarding DL's mainline yield for 2012?

DL doesn't release its mainline only revenue information in its quarterly filings - which is all they have provided so far for 2012. They release consolidated revenue information only.

You're joking, right? Didn't you work for DL for over 20 years? No four-function calculators in Brazil? In case you aren't joking, I simply divided the DL mainline passenger revenue of $25.237 billion by the Rev Passenger miles of 169.584 billion and the result equals 14.88 cents per mile. It's very simple math, and the numbers are provided in the fourth quarter earnings release.

In fact, the 14.83 and 14.53 both came from AMR's financial statements and represent quarterly and 12 month results.

No, that's false. Now you're making things up. The 14.88 cents I posted earlier was DL's 2012 full year mainline yield and AA's mainline yield was 14.83 cents for the full year 2012. Nowhere did I post 14.53, AA's fourth quarter yield. As I posted before, very slight advantage to DL but the two numbers are essentially identical. Here are the fourth quarter releases for both DL and AA where you can check the numbers:

http://news.delta.com/index.php?s=43&item=1848

http://finance.yahoo.com/news/delta-air-lines-announces-december-123000843.html

OOPS.

I could go on about how disappointed in you and how you have deceived and manipulated numbers but I won't do that because I recognize that it is easy to mix numbers up - even for those who intend to be honest, which is exactly what I believe you intend to be. A data error... that's all.

Now you're sounding like a pathological liar. I did not mix up, confuse or mis-post any numbers in this thread, despite your pathetic claims that I did. I understand your childish motivation to try to catch me fudging the numbers like you freqently do, but no dice, WT. Better luck next time. And unlike you, if I err, you'll see me own up to the mistake and apologize.

And for the most recent quarter, AA's non-fuel, no specials CASM was 8.58 compared to 8.45 for DL. IN the quarter when AA's costs should have bottomed out, AA still has a higher CASM than DL - and DL is saying they will get another billion dollars in costs out in 2013... as much as AA got out from labor in 2012.

No, the bolded portion is not correct. Not all of AA's labor cost reductions were effective for the entire fourth quarter - the pilots' new contract wasn't approved by the bankruptcy court until December 19, and pilots account for $300 million of annual savings. Accordingly, labor costs should continue to decline in the first and second quarters of 2013 as the savings kick in. Some of the cost-savings measures for FAs were not implemented until November/December and some have yet to be implemented. Many of the early-out selectees (mechanics and flight attendants) have yet to depart, keeping labor costs higher than they will be once they separate. Labor costs should bottom out in the third quarter of 2013.

Yes, as I've said multiple times, DL had a great year in 2012. But from what I see, DL has a negligible systemwide mainline revenue premium (5/100 of one cent) to AA. And, of course, DL enjoys a huge revenue premium on a consolidated basis due to its much larger regional network (as a proportion to the consolidated total), a deficiency that AA plans to address with the soon-to-arrive additional 2-class 76-seaters. No doubt DL will continue to win that derby due to its dominance at LGA and elsewhere, but I expect that AA will increase its consolidated yield and unit revenue substantially and narrow the gap over the next several years.

 

[WorldTraveler]

I wouldn't know what kind of calculators Brazil has because I am not there.
As I noted, DL does not provide a statistic for mainline passenger yield. And I have also found that comparing calculated vs. provided data doesn't usually result in the same answer.

You are absolutely right that you did not mention 14.53. THAT IS my bad and I misquoted you. I have no problem admitting when I am wrong and have done it many times.

But it doesn't change that DL's average stage length is longer than AA's which means comparable yields on a longer stage length are likely more profitable.

It also doesn't change that DL has grown in NYC dramatically over the past several years, largely taking premium revenue from AA - which is clearly evident in revenue share shifts as well as in key markets such as LGA-ORD, -DFW, -MIA, -STL, -BNA, -RDU, -LAX, -SFO - come to think of it most every market in which DL and AA overlap in NYC domestically - plus a bunch overseas. How is AA's JFK-NRT flight doing? You don't need to say JL - because they flew that route by themselves before including on to GRU. DL's revenue position in NYC has basically flip-flopped over the past 7-8 years; DL didn't even operate JFK-NRT service - and neither did NW before the merger but AA did.

Do you somehow think that all of the revenue that AA has given up in key industry markets has been replaced by their growth in Latin America which incidentally is a higher cost entity than the rest of the world? Look at AA's revenue change over the past 5 years compared to other carriers and it becomes apparent that a significant part of AA's problem is indeed revenue related.

You and a few others get all excited about AA's recent revenue growth - but forget to mention the number of years that AA trailed the industry in revenue performance.

It would be quite fine w/ me if AA improves its revenue performance.... as I have noted multiple times, when AA is up, UA is down and vice versa... DL somehow manages to keep growing revenues while AA and UA knock each other out.

You seemed to skip past the fact that DL has said it will get $1B more in costs out as part of its refleeting. What does your calculator say DL's RASM should be if you take $1B more costs out on the same revenue?

Even if AA's costs have not fully come out, they are also not paying pension expenses... every carrier in BK has watched their cost go up as they exit BK because they have to start paying pensions.

On similar revenues and lower costs, DL is still ahead of the game. Since DL has said they continue to gain corporate revenue, presumably some of which continues to be from AA, then the revenue situation is not stable.

You also skated past the comment about cancelling debts is ok but protecting stockholders is not. Is that the way it works in the land of fruits and nuts?

 

[700UW]

LGA-LAX?

No such route, the perimeter rule prevents it, same for LGA-SFO.

 

[WorldTraveler]

you are mostly correct, 700.
LGA-LAX cannot be flown except for on Saturday when the perimeter restrictions are lifted -but also when there is little premium travel so no one has bothered to retain the route for any length of time.

Obviously, for LAX and SFO, the relevant NYC airport that should be discussed is JFK, not LGA.

FWAAA and I can go back and forth about single data points -and that is valid - and statements should be accurate.

But whether individual data points show it or not, the big picture remains that DL has grown significantly in key markets where AA and US were dominant not too many years ago - with AA and US growing very little in key DL markets.

Despite buying the Pan Am assets, DL didn't manage to make the JFK transcon markets work for years - until they seemed to finally get serious about them a relatively few years ago. Virgin America is a much stronger airline in the transcon markets and it is precisely because of them that AA and UA continue to try to walk away from the popular segment of the market. Because DL is not taking that approach but competing directly against low fare carriers including B6, AA by default is giving up market share to DL as well.

Add in the slot deal and DL really has put a lot of distance between itself and its other NYC competitors that will be very hard for those competitors to overcome. Given that NYC is a key "cornerstone" of AA's network - whether they use that term today, it makes it very hard for AA to compete for business when it has dropped to #3 or #4 in the NYC market.
NYC is a very rich market and AA has a lot of loyal passengers in the market who have paid AA lots of money. It is precisely because NYC is so critical and AA has such a strong historical presence that DL is targeting AA in NYC.

It also should be apparent that AA is fighting very hard to not become like US, which has lost the size in the largest coastal markets to be able to command revenue premiums - something about which Parker has spoken of on multiple occasions.

No one can deny that AA is weaker in key domestic and int'l markets than it was even 3 years ago. Even if AA has improved its finances somewhat, it has not gained a financial advantage yet and may not - esp. since DL and WN are both engaged in cost-cutting efforts to ensure that AA cannot regain what it has lost - and to allow DL and WN to continue to gain key revenue.

For years, AA fans have hoped that AA would be able to stop the very apparent shift in revenue that has taken place but that has still not occurred.

 

[777 / 767 / 757 Love]

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

Not really if you look at it from a "NEED" standpoint, not purely numbers. 500 sounds like a lot, but if you need 100 new ADDITIONAL wide-bodies and need to replace 200 narrow bodies, plus about 100 old wide-bodies, it all adds up. Number is big because they need more capabilities for Long-haul international flights while also needing to replace a large segement of their narrow body domestic work horses (MD-80s). Just a perfect storm that DA will face in 5-10 if she doesn't start working on the solution now.

Cheers,
777 / 767 / 757

 

[Glenn Quagmire]

AA will have the most leveraged balance sheet in the history of US aviation - perhaps worldwide. How very American.

It might look something like NWA did after (Wings Holdongs) Checci, Wilson, Malek, Anderson, and company completed the LBO in 1989?

AA's purchase of new aircraft will pay off. Once they finish off the overhaul group, they will begin to flourish unless the TWU begins to work for free in Tulsa.

 

[WorldTraveler]

I don't think you will debate how horrific the LBO was to NW employees and how NW's fleet had to age under the weight of the debt that NW was forced to pay off. The sad part is that NW had regained a pretty decent financial position by 9/11 when the bottomed dropped out again.

With a much younger fleet and one that might not be a whole lot more fuel-efficient than its competitors even w/ a lot more debt, AA has very little room to cut further - except another round of cuts that would undo any gains made since BK - merger or not - and then keep taking more.

The difference between AA's projected fleet costs and DL's and/or UA's could be as much as $1B in extra expenses per year. Given that other carriers will still have current generation fleets, the fuel savings is not going to be as big as some would like to think.

The real savings comes in maintenance expenses for the first several years of each new aircraft. B6 has used a new fleet masterfully to keep costs down - but they don't have a senior workforce either.

You can do a lot of maintenance for $1B/year.... all of the big 3 spend less than $3B/year on maintenance today.

7x77,
DL might well face much higher fleet costs down the road... but for now DL says there is a glut of high quality used narrowbodies and the chances are very high that the glut will extend to widebodies in a couple years as the 787s and 350s come online - and quite frankly as a few airlines around the world fail which will most certainly happen w/ current fuel prices and the weak economy in Europe along w/ stiff Gulf competition.

DL also doesn't subscribe to the notion that aircraft have to be dumped after 20 years which is the way US airlines have operated..... foreign airlines have changed out aircraft far more frequently whch helps create the glut.

DL believes the 767ER can be a 30 year aircraft. DL might be kicking the problem down the road... but I suspect that the industry will have changed enough in 10 years that DL will have time to react if it is necessary to do so. They have managed to pick up about 150 M90s and 717s at well below market rates for current generation narrowbody capacity - even though those two models have oeprating costs on par w/ current generation.

I personally don't buy the latest generation technology of much of anything, esp. electronics, opting instead for one generation older for a much lower price. I'm not alone in that practice.

I suspect DL is viewing aircraft purchases in the same way.

DL also said when it bought the refinery - which costs about the equivalent of less than 2 widebodies - that it was far cheaper to buy a refinery than it was to buy new aircraft and still get the same fuel costs w/ a lot lower debt.

 

[silverbird007]

Someone sounds very concerned about the new American Airlines, Don't worry Deltamart will be just fine. Just keep those tickets cheap and everything will be fine in Atlanta.

 

[WorldTraveler]

nice characterization but you apparently glossed right past the post by FWAAA that DL's yield is nearly identical to AA's. By your logic, if DL sells cheap tickets, AA does too.

 

[silverbird007]

Yes but some of us are obsessed about it and some are not!

 

[WorldTraveler]

sorry to hear of your obsession.... providing facts does not equal obsession. It does explain the change in revenues and fortunes between the network carriers over the past 10 years