WorldTraveler
Corn Field
- Dec 5, 2003
- 21,709
- 10,662
- Banned
- #61
I am aware of those differences in the way DL and AA do business... but all of those numbers all drop down to the final CASM number and there are also a host of sources that use DOT and SEC data to calculate CASM on a mainline, comparable system basis - ie ex-profit sharing, special items etc basis.
AA has had a mainline, equal comparison CASM 15-20% higher than DL for a number of years - from 5-10% higher than UA.
Even if you factor in all of the adjustments that you note, AA's employee cuts bring AA's CASM down to levels comparable with DL - but it doesn't surpass DL.
DL's mainline CASM recently has been lower than WN's, reflecting DL's continued cost controls while WN has stopped growing which has been their primary tool to keep CASM in check.
WN's addition of 738s WILL drop their CASM, as will DL's early retirement programs and its replacement of older jets with newer fuel-efficient aircraft - and DL is adding those new jets at prices below what AA will spend to upgrade its own fleet.
Neither the cost reductions that DL and WN are doing now are factored into the target that AA must reach in order to be competitive. In fact, it is highly possible that AA's decision to revisit their term sheets while also "agreeing" to freeze the pensions is an opportunity to extract even larger salary and benefit cuts under the guise of having to retain the pension obligations = which AA likely will still have at least in part.
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AA will have no trouble trading places with UA.. and AA's CASM will get to levels on par with where DL and WN are now.... but it is very possible - if not likely that DL and WN's cost cutting efforts will push their CASM down by another 5-10% which makes it much harder for AA to continue cutting and still keep its workforce at some level of engagement necessary to run the airline.
It's also worth noting that US' costs are higher than DL and WN's (even on a comparable look basis) and US has no public plans to significantly reduce its costs. Thus, US' costs will likely end up higher than AA, DL, and WN's on a standalone basis - and under UA's.
Believing that a merger between a carrier that has costs somewhat in the ballpark (a reorganized AA) with a carrier that has the 2nd highest costs is a recipe for failure.
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But I have no doubt that AA will get its costs where it needs to be.
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I am far less convinced that AA either by itself or with AA will be able to turn its revenue performance around - and there has been no cases of successful restructurings at airlines (if not other companies as well) that have occurred without significant increases in revenues.
So far, AA has yet to give any indication of how they will increase revenues, particularly in light of the reduced capacity that higher fuel prices dictate.
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And even in an asset acquisition, as Keller notes, the acquiring party has to take on significant portions of the debt as part of the acquisition - or pay a large premium in order to pay off some of the overall debt.
Creditors know that one way or the other, the company's obligations must be covered.
DL took on a significant amount of debt as well as a number of aircraft as part of the Pan Am asset acquisition. Again, UA took on less aircraft, less debt, and fewer employees despite acquiring the most lucrative assets.
