Schnurman: American Airlines pilots need a reality check

[FWAAA]

Last year AA took in $23,7billion.Their largest revenue EVER.

That was last year, Bob. How's revenue holding up so far this year? A week ago, AA said that first quarter mainline unit revenue was down about 10.1% year over year (midpoint of the announced range) and that consolidated unit revenue was off about 10.7%. Read about it here:

http://phx.corporate-ir.net/phoenix.zhtml?...1hCUkw9MQ%3d%3d

Comined with the much lower capacity, my guess is that full year revenue is going to be about $18 to $20 billion, if AA's lucky. Nowhere near last year's bonanza.

Fuel however went from $6.670Billion to $9 Billion, but since then fuel has dropped by nearly two thirds, so AA may spend under $5 billion this year on fuel.

I agree completely. Fuel prices are no longer the major impediment to success like they were in 2006-08. Now the problem is revenue. Not costs - but revenue.

AA had other unusual expenses that they won’t likely see again in 2009, they wrote off $1,2 billion in "Special Charges", an increase of over $1.1 billion from the year before, but that’s not the only place that AA hid all that extra revenue, AA has been slapping winglets on their Boeings (to lower fuel consumption), buying $750,000 pushback tractors that they can’t use, and buying back parts for dollars on the penny compared to what they sold them for a few years back. This helped increase their maintenance costs on their reduced fleet by another $180 million. They had less planes to maintain but they spent more than ever before.These costs are not recurring.

No, Bob, these special charges were mostly non-cash writedowns, which didn't provide a place to "hide" extra revenue. AA lost money even before the special charges, so if everything stayed the same this year except no special charges, AA would still lose money. You're misunderstanding the effect special charges have.

Additionally, worthless tractors and winglets are capital items, and thus, their purchase didn't contribute to the losses.

Lately they have been reporting that advanced bookings are alarmingly low but according to an ATA news release they are only down 2.5%, yes two-point-five percent year over year on a capacity reduction of at least 5.5%.

Since ATA isn't the entity writing your paychecks, I'd focus on AA's financial conditions instead of industry-wide generalities published by a trade group, but you're free to tilt that way if you want.

I've flown almost weekly since Jan 1, nearly every flight was full and they look that way as far as I can see into the future.

Me, too, and none of the flights have been in coach. And 8 of them have been international trips. And empty seats in J and F abound. And everyone requsting an upgrade to biz is getting it. Paid premium traffic is down sharply. That coach is full or that short domestic F is full is not a reliable indicator of AA's financial woes. As a top tier elite, AA grants me (and all other EXPs) a free domestic upgrade if available. Five years ago, in a very stupid move (IMO), AA matched CO and DL and stopped requiring EXPs to buy the electronic upgrades (that used to be stickers). So I just got off a plane from BOS here at LAX where I sat in F both ways for $218 including all taxes. AA got about $180 of that. And even Plats and Golds got their upgradesn (although they still have to buy the stickers).

Cargo ton miles went down but yield for cargo went up 12%, they moved less cargo but made more money on the cargo they moved.

Their ASMs went down around 4% but their Yield went up by almost 9%.

Once again, Bob, those were last year's numbers. What matters this year are this year's numbers, and they're ugly. Fugly, even. At UA and NW, Cargo volume has been down about 50% year over year for the past 3-4 months. At AA, cargo was down 29.6% in February of this year from Feb of last year and was down 28.2% for Jan and Feb combined. That says that the cargo collapse is getting worse, since February's number was larger than the first two months combined. Think AA was able to increase cargo rates enough to recoup that traffic decline?

Again, the second paragraph of yours is about last year. Old news. What matters in 2009 is revenue in 2009. So far this year, it looks like yield will be about where it was three or four years ago. Not good.

So when you take out all the unusual expenses AA is looking pretty good. In fact their expenses could be $6 billion less in 2009 than it was in 2008. With all those unusual expenses, AAs losses for 2008 were only $2billion. So if AA wasnt able to hide that extra $1.577 billion they would have only lost around $423 million. If Fuel was the same price in 2008 as it is now they wouldnt have been able to spend it fast enough, they would have turned at least a $2billion profit for the year.

Your numbers for last year's results don't line up with the reality. In another post, you said you took the numbers from AA's press release, which I assume is this one:

http://phx.corporate-ir.net/phoenix.zhtml?...&highlight=

AMR's net loss last year not including the special items was $1.2 billion, not a mere $423 million as you claim. This year, I predict a net loss before special items of $2.5 billion or more.

That leaves AA with a possible $5 billion profit for 2009,but I'm sure they will find some way to hide it before the workers see it and demand their concessions back.

If AMR signed contracts with all three unions tomorrow their stock would go from $3/share today to $30/share by the end of the year.

All of a sudden you're seeing a $5 billion profit? Seems to me that the APA members aren't the only ones in need of that reality check. I agree that fuel will probably cost $3 billion less this year than last year. But if revenue is $3 billion less than last year (consistent with the first quarter trends), then AA loses $1.2 billion before special items just like last year. And I predict that total revenue is down a whole lot more than a mere $3 billion.

I agree about the stock price. If AMR signed contracts with all three unions tomorrow with 30% wage and benefit cuts, its stock would immediately soar. I guarantee that if AA today gave in to the pilots' 50% increase demands, AA would file a Ch 11 peitition before June 1.

Contrary to your claims of a $5 billion profit for this year - AA would make that profit only if fuel were free for the rest of 2009.

 

[Bob Owens]

No, Bob, these special charges were mostly non-cash writedowns, which didn't provide a place to "hide" extra revenue. AA lost money even before the special charges, so if everything stayed the same this year except no special charges, AA would still lose money. You're misunderstanding the effect special charges have.

Additionally, worthless tractors and winglets are capital items, and thus, their purchase didn't contribute to the losses.



Since ATA isn't the entity writing your paychecks, I'd focus on AA's financial conditions instead of industry-wide generalities published by a trade group, but you're free to tilt that way if you want.



Me, too, and none of the flights have been in coach. And 8 of them have been international trips. And empty seats in J and F abound. And everyone requsting an upgrade to biz is getting it. Paid premium traffic is down sharply. That coach is full or that short domestic F is full is not a reliable indicator of AA's financial woes. As a top tier elite, AA grants me (and all other EXPs) a free domestic upgrade if available. Five years ago, in a very stupid move (IMO), AA matched CO and DL and stopped requiring EXPs to buy the electronic upgrades (that used to be stickers). So I just got off a plane from BOS here at LAX where I sat in F both ways for $218 including all taxes. AA got about $180 of that. And even Plats and Golds got their upgradesn (although they still have to buy the stickers).



Once again, Bob, those were last year's numbers. What matters this year are this year's numbers, and they're ugly. Fugly, even. At UA and NW, Cargo volume has been down about 50% year over year for the past 3-4 months. At AA, cargo was down 29.6% in February of this year from Feb of last year and was down 28.2% for Jan and Feb combined. That says that the cargo collapse is getting worse, since February's number was larger than the first two months combined. Think AA was able to increase cargo rates enough to recoup that traffic decline?

Again, the second paragraph of yours is about last year. Old news. What matters in 2009 is revenue in 2009. So far this year, it looks like yield will be about where it was three or four years ago. Not good.



Your numbers for last year's results don't line up with the reality. In another post, you said you took the numbers from AA's press release, which I assume is this one:

http://phx.corporate-ir.net/phoenix.zhtml?...&highlight=

AMR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(Unaudited)

Twelve Months Ended
December 31,
-------------------
Percent
2008 2007 Change
--------- -------- ---------
Revenues
Passenger - American Airlines $18,234 $17,651 3.3
- Regional Affiliates 2,486 2,470 0.7
Cargo 874 825 6.0
Other revenues 2,172 1,989 9.2
--------- -------- ---------

Total operating revenues 23,766 22,935 3.6
--------- -------- ---------

Expenses
Aircraft fuel 9,014 6,670 35.1
Wages, salaries and benefits 6,655 6,770 (1.7)

Other rentals and landing fees 1,298 1,278

Depreciation and amortization 1,207 1,202 0.4

Maintenance, materials and repairs 1,237 1,057 17.0

Commissions, booking fees and credit

card expense 997 1,028 (3.1)
Aircraft rentals 492 591 (16.7)
Food service 518 534 (3.0)
Special charges 1,213 63 *
Other operating expenses 3,024 2,777 8.9
--------- -------- ---------

Total operating expenses 25,655 21,970 16.8
--------- -------- ---------
Operating Income (1,889) 965 *

Other Income (Expense)
Interest income 181 337 (46.4)
Interest expense (756) (914) (17.2)
Interest capitalized 33 20 68.1
Miscellaneous - net 360 96 *
--------- -------- ---------
(182) (461) (60.5)
-------- ---------

Income/(Loss) Before Income Taxes (2,071) 504 *
---------
Income tax - - -
--------- -------- ---------
Net Income $(2,071) $504 *

Earnings/(Loss) Per Share
Basic (7.98) $2.06
========= ========
Diluted (7.98) $1.78
========= ========

Number of Shares Used in Computation
Basic 259 245
Diluted 259 299

* Greater than 100%

Well here's the numbers. Looks pretty clear that the Special charges and the capital expenditures did contribute to the loss they posted. But I guess it just comes naturally trying to convince people that 1+1 doesnt equal 2 when you are a lawyer by profession.

AMR's net loss last year not including the special items was $1.2 billion, not a mere $423 million as you claim.

Did I claim that? I beleieve I said if not for those unusual and/or possibly discretionary expenditures (Special charges, Goldhoffers, winglets etc) that the loss, as shown on the company provided figures above.

Once again, Bob, those were last year's numbers. What matters this year are this year's numbers, and they're ugly. Fugly, even. At UA and NW, Cargo volume has been down about 50% year over year for the past 3-4 months. At AA, cargo was down 29.6% in February of this year from Feb of last year and was down 28.2% for Jan and Feb combined. That says that the cargo collapse is getting worse, since February's number was larger than the first two months combined. Think AA was able to increase cargo rates enough to recoup that traffic decline?

Well what you choose to leave out is that about half of that 29% was due to the drawdown of the A-300 fleet. AA changed equipement and basically walked away from a lot of cargo business because they dont route equipement based on Cargo. The fact remains that their yields are up. Will the cargo business continue to shrink? Probably but what remains will be more profitable. I'd rather have a smaller more profitable airline than just a bigger one.

 

[FWAAA]

Well here's the numbers. Looks pretty clear that the Special charges and the capital expenditures did contribute to the loss they posted. But I guess it just comes naturally trying to convince people that 1+1 doesnt equal 2 when you are a lawyer by profession.

Bob, you claimed that the special items helped AMR "hide all that extra revenue." I don't dispute that AMR wrote off $1.2 billion of special non-cash writeoffs. AMR also booked some one-time gains, like on the sale of American Beacon. Netted together, special items equaled about $900 million or so.

What I am disputing is that you can take those special items and claim that since they're non-recurring, AMR will have $1.2 billion more next year. AMR lost $1.2 billion last year not counting any special items - wouldn't matter if the special items were $1.2 billion or $120 billion. They don't represent any real cash expense last year, so their absence doesn't mean that AMR will have more money in 2009.

Did I claim that? I beleieve I said if not for those unusual and/or possibly discretionary expenditures (Special charges, Goldhoffers, winglets etc) that the loss, as shown on the company provided figures above.

You claimed that AMR would have lost $423 million last year if not for the special items (as I quoted) and the press release clearly indicates that AMR lost $1.2 billion excluding the special items (it's in the headline if you're too lazy to do the math). Disputing that you said it is beyond obtuse.

Well what you choose to leave out is that about half of that 29% was due to the drawdown of the A-300 fleet. AA changed equipement and basically walked away from a lot of cargo business because they dont route equipement based on Cargo. The fact remains that their yields are up. Will the cargo business continue to shrink? Probably but what remains will be more profitable. I'd rather have a smaller more profitable airline than just a bigger one.

Although it is beyond dispute that AA is grounding the AB6 fleet, AA hasn't published any explanation or data about the makeup of the 29% drop. I suspect you're probably right and that some of it is due to AB6 retirements. But why it's down doesn't matter - fact is you're arguing that AA's having a banner year and trotting out (when it's convenient) last year's numbers in feeble attempts to prove it. Doesn't take a rocket scientist or an A&P ticket to see that.

Cargo yields are up this year? Do you have any data or links to support that?

You'd prefer a smaller profitable airline? Wouldn't we all. Problem is, AMR is aiming to be an unprofitable smaller airline. One with fewer employees each making less money.

You keep talking about the nearly $24 billion total revenue airline of 2008 as if that number has any meaning in 2009, when revenue will likely fall short of $20 billion.

 

[Bob Owens]

What I am disputing is that you can take those special items and claim that since they're non-recurring, AMR will have $1.2 billion more next year. AMR lost $1.2 billion last year not counting any special items - wouldn't matter if the special items were $1.2 billion or $120 billion. They don't represent any real cash expense last year, so their absence doesn't mean that AMR will have more money in 2009.

You claimed that AMR would have lost $423 million last year if not for the special items (as I quoted) and the press release clearly indicates that AMR lost $1.2 billion excluding the special items (it's in the headline if you're too lazy to do the math). Disputing that you said it is beyond obtuse.

Apparantly you do not understand what I've been saying, what I was trying to convey is that despite the fact that fuel expenses had increased $2.344 Billion yoy (fuel prices have declined drastically since then)AA would have only lost around $400 million,(from AA.com, the same figures they presented to the union and the Federal Mediator,) if they had not increased their unusual and/or discretionary spending.

Despite the decreased scedule AA paid more in Other Rentals and landing fees($20 million more)
Despite the smaller fleet size they paid more on Maint($180 million more)
Their Other operating expenses increased by $247 million.
That plus the $1.2 billion in Special charges-(up $1.150 billion from 2007) is how I came to that figure. Sorry I lost you there.

Do you doubt that AA will spend Billions less this year on fuel? If fuel prices were at 2007 or todays levels AA would have made billions in profits, even with all those unusual, discretional and special expenses I mentioned.

What is your definition of "Special Charges", the best I could dig up was "expenses in a buisness that do not normally occur in the business.

Although it is beyond dispute that AA is grounding the AB6 fleet, AA hasn't published any explanation or data about the makeup of the 29% drop. I suspect you're probably right and that some of it is due to AB6 retirements. But why it's down doesn't matter - fact is you're arguing that AA's having a banner year and trotting out (when it's convenient) last year's numbers in feeble attempts to prove it. Doesn't take a rocket scientist or an A&P ticket to see that.

What I'm trotting out is figures directly from AA while all you are doing is showing off your vocabulary and cross examination skills.

Cargo yields are up this year? Do you have any data or links to support that?

Sure, again from AA.com.
Twelve Months Ended
December 31,
-------------------- Percent
2008 2007 Change
---------- ---------
-----------

American Airlines, Inc. Mainline
Jet Operations
Revenue passenger miles (millions) 131,757 138,453 (4.8)
Available seat miles (millions) 163,532 169,906 (3.8)
Cargo ton miles (millions) 2,005 2,122 (5.5)
Passenger load factor 80.6% 81.5% (0.9)
pts

Passenger revenue yield per passenger
mile (cents) 13.84 12.75 8.6
Passenger revenue per available seat
mile (cents) 11.15 10.39 7.3
Cargo revenue yield per ton mile (cents) 43.59 38.86 12.2
Operating expenses per available seat
mile, excluding Regional Affiliates
(cents) (1) 13.87 11.38 21.9
Fuel consumption (gallons, in millions) 2,694 2,834 (4.9)
Fuel price per gallon (cents) 302.6 212.1 42.7

Regional Affiliates
Revenue passenger miles (millions) 8,846 9,848 (10.2)
Available seat miles (millions) 12,603 13,414 (6.0)
Passenger load factor 70.2% 73.4% (3.2) pts

AMR Corporation
Average Equivalent Number of Employees
American Airlines 70,900 71,800
Other 13,200 13,700
--------- ---------
Total 84,100 85,500

Yield increased 12.2 %, are are you too obtuse to see that?

You'd prefer a smaller profitable airline? Wouldn't we all. .

Why would you care? If you felt that way then why dont you simply buy first class tickets all the time?

Problem is, AMR is aiming to be an unprofitable smaller airline. One with fewer employees each making less money

Well I dont question your opinion of AMR managements objectives there.
Funny how your true feelings come out when you are angry.

You keep talking about the nearly $24 billion total revenue airline of 2008 as if that number has any meaning in 2009, when revenue will likely fall short of $20 billion.

It means enough that the company included it in their presentation to the mediator and they are certainly a better indicator of the health of the comapny than projections.

In reality I dont care where AA gets the money from, cancelling management bonuses, keeping old planes, using old terminals, not installing wingletts and getting more 3P work instead, whatever, thats their problem, they found the money to pay and extra $2,3 billion in fuel last year, which they wont have to pay this year, they can find a way to get the extra couple of hundred million we need.

 

[Bob Owens]

Link to AA.com financials
http://phx.corporate-ir.net/phoenix.zhtml?...&id=1246734

 

[eolesen]

Bob, I was just looking at my 401K statement from last September. Excellent year to date performance. That didn't stop it from today being worth about 60% of its Jan 08 value.

Continue to trot out the full year 2008 all you like. It's like using last year's NCAA stats to say which team is going to be in the Final Four. Last year only counted up until the final seconds of the last game. It's this year you need to be focusing on.

I predict (channeling TWA 007) that the 1Q09 numbers for all major US airlines, including Southwest, will be worse than getting a lap dance from Nancy Pelosi at a topless bar.

 

[Bob Owens]

Bob,
I predict (channeling TWA 007) that the 1Q09 numbers for all major US airlines, including Southwest, will be worse than getting a lap dance from Nancy Pelosi at a topless bar.

I suppose that you'd rather get one from Rush Limbaugh.

 

[eolesen]

Uh, yeah, right. Haven't ever listened to him, but hey, thanks for the ad hominum. Guess it proves the point you've got an empty bag when it comes to defending your point. Sort of like the guy you elected president.

 

[FA Mikey]

Empty bag? Thats the one who just left office. Eight years of failure.

 

[Bob Owens]

Uh, yeah, right. Haven't ever listened to him, but hey, thanks for the ad hominum. Guess it proves the point you've got an empty bag when it comes to defending your point. Sort of like the guy you elected president.

I think the figures proved my point, since you cant find fault in that you say that last year doesnt count, thats an admission that I'm right, but since we are asking for Retro it most definitely "counts".

 

[FWAAA]

Do you doubt that AA will spend Billions less this year on fuel? If fuel prices were at 2007 or todays levels AA would have made billions in profits, even with all those unusual, discretional and special expenses I mentioned.

We're in agreement on fuel. Had AA been able to buy fuel last year at prices from earlier years, it would have made billions in profits. For an extreme example, AMR's fuel spending was $1.5 bilion in 1998 and 1999, and in 2008 it totaled $9.0 billion. And I'm positive that AMR will spend less this year on fuel. In mid-March, AMR announced that the total fuel bill this year is expected to be about $5.0 billion, a savings of $4.0 billion yoy:

http://ccbn.10kwizard.com/cgi/convert/pdf/...p;dn=2&dn=3

Where we apparently disagree is the extent to which revenue declines will outpace fuel savings. In mid-March, AMR announced that first quarter total revenue is expected to be about $1.0 billion less yoy. That takes into account RASM declines, less capacity, lower cargo and other revenue.

In that same mid-March release, AMR announced that first quarter fuel spending is likely to be about $1.3 billion, a savings of about $700 million yoy.

Hmmm. See the problem? Fuel is down about $700 million in Q1 but revenue is down about $1.0 billion. If these trends continue throughout 2009 (I see nothing that indicates otherwise), AMR will report huge losses each quarter of this year until a recovery causes unit revenue to increase again. In 2008Q1, AMR lost $328 million with no special items. Based on the mid-March Eagle Eye, expect the 2009Q1 loss to exceed $600 million before any special items.

That's a loss of $6.6 million per day. At that rate, the full-year loss could exceed $2.4 billion. Which makes sense given that last year's real loss (before any special items) was $1.2 billion and this year, revenue is on target to fall by $1.2 billion more than fuel price savings.

So just keep telling yourself that fuel savings will save the day. I don't think they will. Restore and more? Restitution? Your future is one of more concession demands by management, not raises. And if revenue doesn't improve this year, a Ch 11 filing (where the concessions will be imposed if not agreed upon).

What is your definition of "Special Charges", the best I could dig up was "expenses in a buisness that do not normally occur in the business.

Works for me. In 2008, most of AMR's special charges were non-cash accounting write-downs. Items the CPAs like to keep track of but don't require any current out-of-pocket cash spending. Generally, they relate to cash spent years ago on things the accountants find are no longer of any value, and thus have to be written off, decreasing current earnings (or increasing current losses).

What I'm trotting out is figures directly from AA while all you are doing is showing off your vocabulary and cross examination skills.

Now there's an example of taking the high road.

Sure, again from AA.com.

<snip>

Yield increased 12.2 %, are are you too obtuse to see that?

Sure, cargo yield increased in 2008 compared to 2007. I'm curious about how far cargo yields will fall this year along with the nearly 30% decline in cargo volume for Q1. Again, you're trotting out last year's numbers as if they represent this year's earnings and expenses.

In reality I dont care where AA gets the money from, cancelling management bonuses, keeping old planes, using old terminals, not installing wingletts and getting more 3P work instead, whatever, thats their problem, they found the money to pay and extra $2,3 billion in fuel last year, which they wont have to pay this year, they can find a way to get the extra couple of hundred million we need.

The TWU took concessions of what? $660 million a year? About half of that was achieved through job losses and about half through pay reductions. So all you need is about $330 million a year, or almost another million dollars a day (when the company is losing about $6.6 million a day in Q1). I'm skeptical you'll achieve that, but I'll applaud you if you are able. My prediction is on another $300 million a year in concessions before this is all over.

 

[frontline]

FWAAA: good points about the fuel and revenue numbers. And don't forget that AMR has a bunch of debt roll over coming up this year or next. Lots of cash burn and expenses to pay, but that reality doesn't suit the pilot agenda so they will keep pushing and pushing until we all go over a cliff.

 

[Bob Owens]

Where we apparently disagree is the extent to which revenue declines will outpace fuel savings. In mid-March, AMR announced that first quarter total revenue is expected to be about $1.0 billion less yoy. That takes into account RASM declines, less capacity, lower cargo and other revenue.

In that same mid-March release, AMR announced that first quarter fuel spending is likely to be about $1.3 billion, a savings of about $700 million yoy.

So you feel that "announced expectations and projections" at a time when every labor group on the property is in contract negotiations are a better means to gauge where a company is headed than past performance? I dont.

According to the ATA advanced bookings are only down 2.5% at AA, not exactly a huge reduction, and thats against a reduction in capacity. So what is AA basing their projections on?

Revenue for the quarter is expected to be around $1billion less, well if they cut capacity by 8% yoy and last year they took in around $24 billion the reduced capacity would account for about $1.9 billion less revenue (for the year) if prices were constant.

Airlines dont build their business based on just one quarter because there are slow times of the year and their are busy times of the year. This is usually their slow time. Airlines normally lose money in the first quarter, at least for the last quarter of a century that I've been in this industry.

Hmmm. See the problem? Fuel is down about $700 million in Q1 but revenue is down about $1.0 billion. If these trends continue throughout 2009 (I see nothing that indicates otherwise), AMR will report huge losses each quarter of this year until a recovery causes unit revenue to increase again. In 2008Q1, AMR lost $328 million with no special items. Based on the mid-March Eagle Eye, expect the 2009Q1 loss to exceed $600 million before any special items.

Not really. Once they burn through their hedges their fuel savings will increase even further plus the first quarter is normally one of the low yielding quarters anyway. Next year they should do even better with the fuel because they should have burnt through all their high priced hedges by then, they will have less gas guzzlers, less capacity and more winglets.

That said I'm driving down to DC because all the flights are full. In fact everywhere I've flown over the past three months (SFO, DFW, ORD,SJU & BOS)during this normally slow time, the planes have been at or near capacity.

So just keep telling yourself that fuel savings will save the day. I don't think they will. Restore and more? Restitution? Your future is one of more concession demands by management, not raises. And if revenue doesn't improve this year, a Ch 11 filing (where the concessions will be imposed if not agreed upon).

Fuel is just part of the story. The nearly $2 billion in extra expenses that they tacked on to last years report should be gone as well. If they still cant(wont) pay us they should just shut the doors now.

Its funny how the rest of the industry, most with higher CASMs than AA, are expected to make money this year but everything looks gloomy, according to you, for AA. What are you waiting for the stock to hit $2/share so you can scoop it up at bargain prices?

Sure, cargo yield increased in 2008 compared to 2007. I'm curious about how far cargo yields will fall this year along with the nearly 30% decline in cargo volume for Q1. Again, you're trotting out last year's numbers as if they represent this year's earnings and expenses.

Well they recently announced they are closing a bunch of the smaller cargo hubs so yield may increase even though the automotive industry(which accounts for a huge chunk of Cargo volume) is still in a funk but that could change before year end. But then again the company even said that Cargo is just extra, they dont plan around cargo, if they can add it on they will, they dont seek out the business. When's the last time you saw an Ad on TV for AA Cargo?

The TWU took concessions of what? $660 million a year? About half of that was achieved through job losses and about half through pay reductions.

Wrong. They took $660 million in concessions then another $650 million or more in job losses. Because there are around 35% less of us snap back would only cost them around $430 million.They would still be saving $230 million, plus around $650 million, or around $880 million.

 

[Hopeful]

Not that Bob needs any help from me, but he is 100% percent correct about the concessions...
The initial amount DID NOT include layoffs. The TWU's share was well over a billion dollars like he stated.

I tell you what...Since you think AA is in such financial doom and we should expect more concessions. Then we we need to make sure the company is driven into the ground even further...This whole notion of giving more concessions so AA thrives and survives is not gonna happen.......

Did I mention PUP DAY is coming soon????????????????

 

[FWAAA]

So you feel that "announced expectations and projections" at a time when every labor group on the property is in contract negotiations are a better means to gauge where a company is headed than past performance? I dont.

Sure, Bob. Last year's results are a much better indicator than the numbers for this year's first quarter. Keep telling yourself that.

According to the ATA advanced bookings are only down 2.5% at AA, not exactly a huge reduction, and thats against a reduction in capacity. So what is AA basing their projections on?

Your ATA numbers are fantasy. Don't know where you got them, when they were issued or whether you're correctly interpreting them.

According to AA, consolidated capacity is down 10% yoy, and unit revenue (RASM) is down in the first quarter by a little more than 10% yoy. So you have about 90% of the ASMs each collecting only about 89.5% of the revenue from last year. Rounded, that's about 80% of last year's revenue. Read about it in the 8-K:

http://ccbn.10kwizard.com/cgi/convert/pdf/...p;dn=2&dn=3

Revenue for the quarter is expected to be around $1billion less, well if they cut capacity by 8% yoy and last year they took in around $24 billion the reduced capacity would account for about $1.9 billion less revenue (for the year) if prices were constant.

See that bolded portion? That's the rub: Prices have declined about 10.5% per ASM, in addition to the 10% capacity reduction. Don't know why you've ignored the numbers AA issued two weeks ago. Perhaps because they're reflective of reality instead of the fantasy that results in 2009 will mirror 2008.

Airlines dont build their business based on just one quarter because there are slow times of the year and their are busy times of the year. This is usually their slow time. Airlines normally lose money in the first quarter, at least for the last quarter of a century that I've been in this industry.

I've been gambling on airline stocks (and analyzing their numbers) far longer than the quarter century you've been a worker bee for the airlines. Revenue for this year's first quarter is going to come in about 20% less than last year's slow unprofitable first quarter. And unless the economy makes a quick turnaround, revenue for subsequent quarters will come in about 20% lower than yoy.

Not really. Once they burn through their hedges their fuel savings will increase even further plus the first quarter is normally one of the low yielding quarters anyway. Next year they should do even better with the fuel because they should have burnt through all their high priced hedges by then, they will have less gas guzzlers, less capacity and more winglets.

If you read the 8-K, you'd know that the numbers I've posted take the out-of-money hedges into account. AMR paid $2.00/gal in January, $1.96 in February, and about $1.80 in March, for a first quarter price of about $1.92/gal, reflecting the high priced hedges. AMR has projected a full year fuel cost of about $1.81/gal, leading to a fuel bill of about $5.0 billion for the year.

That said I'm driving down to DC because all the flights are full. In fact everywhere I've flown over the past three months (SFO, DFW, ORD,SJU & BOS)during this normally slow time, the planes have been at or near capacity.

Fuel is just part of the story. The nearly $2 billion in extra expenses that they tacked on to last years report should be gone as well. If they still cant(wont) pay us they should just shut the doors now.

Its funny how the rest of the industry, most with higher CASMs than AA, are expected to make money this year but everything looks gloomy, according to you, for AA. What are you waiting for the stock to hit $2/share so you can scoop it up at bargain prices?

Actually, first quarter load factors are down significantly yoy, as are yields (leading to the 10.5% decline in RASM). The rest of the industry is not expected to make money this year. On top of that, as you should know after a quarter century in the industry, full flights don't equal profitable flights.

Wrong. They took $660 million in concessions then another $650 million or more in job losses. Because there are around 35% less of us snap back would only cost them around $430 million.They would still be saving $230 million, plus around $650 million, or around $880 million.

Absolute nonsense. AA's concessions totaled $1.62 billion for the represented groups and $1.8 billion total, including management, agents and support staff. 2004's spending on wages and salaries (from the 10-K) reflects reduced spending of $1.8 billion. (2003's spending was only about $900 million less because the concessions were imposed in May.)

Claiming that TWU members suffered $1.3 billion of the total $1.8 billion is ludicrous. When you embelish the truth like that, Bob, people stop taking you seriously. So pilots and FAs suffered only $300 million in concessions? Seriously? Your pants are on fire.

Wage and benefit cuts comprised about half of the concessions, with job reductions accounting for the rest.