What a concept!

[Ken MacTiernan]

eric,

"There's a reason taxi operators & even bus companies (many represented by the union you also represent) replace their vehicles on a regular basis. Same thing with the Class 1 railroads."

Thanks for pointing out the spread of dues collecting by the twu.

The twu a craft union? Never.

AMP a craft union? Always.

GO AMP!

 

[eolesen]

Anything to help the cause, Ken...

 

[FWAAA]

When is a 737 not a 737? When company pundits want to claim one is an apple and one is an orange I guess.

AA's decision to buy new 738s to replace fuel-hog MD-80s is AApples; WN's decision to not buy new 737s to expand its fleet is Oranges. You highlighted WN's decision to not buy expansion 737s as somehow more responsible than AA's decision to buy new 738s in order to replace old, inefficient MD-80s. I suspect that if WN had 224 MD-80s in its fleet right now, it would have been buying new 737s to replace them, just as AA has been doing for the past two years.

AA is not pulling one MD-80 out of service for each 737 they are getting. So some of those brand new 737s are fueling increased capacity.

The first part is certainly true. The second part, not completely. Since 12/31/08, before any of the recent 738s arrived, AA flew 77 older 738s and had 279 active MD-80s. In the two years since then, as of 12/31/10, AA has taken delivery of 76 new 738s and has parked 55 MD-80s, so there are 21 new 738s more than the MD-80 retirements over that period. But those 21 738s don't represent expansion. Recall that in late 2008 and early 2009, AA permanently parked 34 AB6s and that many of the routes were backfilled with 763s and 757s and 738s. So there are 21 more 738s than MD-80 retirements but there are also 34 fewer AB6s. My WAG is that the new 738s are more fuel efficient than the AB6s per ASM. You can call those 21 additional 738s "increased capacity" if you want, but they're really backfilling some of the capacity of the 34 AB6 retirements.

Using todays oil prices are a little unrealistic, with consumption down over the long term oil will likely get cheaper, especially if it has to compete with other government subsidized forms of energy. So the payback is likely to be much longer, add in all the fees that are attached to the money they are borrowing, along with the interest, and the fact that carriers never seem to actaully realize the fuel savings promised, and I suspect that you have an interest in selling airplanes. Perhaps you own Boeing Stock or have some money tucked away in the various institutions that provide financing, who knows, who cares?

Oil will likely get cheaper over the long term? Seriously? You may be right, but most of the industrialized world is betting the other way. For years, we've heard that China represents most of the potential market for new expansion aircraft and if true, China's consumption of jet fuel is going to explode. GM now sells more cars in China than it does here - those cars and all other makes sold in China represent a huge increase in gasoline conumption as the affluent in China buy more and more cars. Same thing in India, which also has four times the US population, just like China. Between just those two countries, there are eight USAs in population. The USA has five percent of the world's population but consumes one-fourth of the world's energy output. As people in the less-developed world begin using energy like we have, energy prices will have to increase.

The people in N America and Europe and parts of S America will probably not increase their consumption of oil at the high historical rates, but the people of China, India, the former USSR, Africa and much of Asia will probably increase their oil consumption over the long term as they increase their air travel and their auto ownership rates.

As for Boeing stock - I suspect that many mutual funds own Boeing; I also suspect that many pension funds (my own included) own Boeing stock, benefitting many union members. Over the long term, Boeing has tended to produce profits - you'd have to be an idiot to NOT own Boeing stock if you manage money for other people. Same thing for oil companies - high oil prices and high oil company profits are good for retirement funds.

Didnt Borman get EAL into a lot of trouble by saddling EAL with a lot of debt by buying airplanes that were supposed to save enough in fuel costs to pay for themselves? Same story, different faces. "Its not a Ponzi Scheme Its a Pyramid Investment Club!"

Sure, but didn't EAL have plenty of other issues as well? As eolesen pointed out, fuel prices didn't increase all that much from the time EAL ordered the A300s until EAL went out of business - so fuel cost savings were minimal. That COULD happen at AA, but IMO, fuel will go up in the future - it won't stay flat or go down in price.

Would a new car pay for itself in fuel savings? Very doubtful, main reason being that I have the ability to perform all the maintenance and repairs myself. So keeping the old car still makes economic sense even if it sucks to drive. Why do I live so far? Because thats what I had to do at the time to get something a little more affordable.

I agree with you that gasoline savings generally will not pay for a new car. More than 30 years ago, I had colleagues rationalize their decision to buy new diesel Rabbits and Honda Civics because they would burn half as much gas (or even less) than their old cars. Problem was, they'd have to drive their new cars 12-18 hours a day to save enough money on gas (as gas was approaching $1.00/gal) to make their new car pay for itself. Most of them drove 5-10 miles each way to work every day and thus, fuel savings contributed very little to their new (large) car payments. But if you could cut your gasoline consumption from 200 gallons a month to 100 gallons, the new car might be a wise investment today, unless, of course, you're right about the future direction of oil prices. I happen to disagree with you about the direction of future oil prices, but not spending tens of thousands of dollars on a new car right now hoping that gas savings pay for the new car is probably the wise decision.

This is a subject where the various unions at AA are not on the same page. In this thread, you're criticising managment for buying new fuel efficient airplanes even though AA is not profitable. The APFA has publicly criticised management for NOT buying enough new 738s early enough - which is exactly the same as my criticism of managment. AA's delay in ordering new 738s cost AA at least a billion or perhaps two billion dollars in extra fuel cost over the past few years - and that's money that didn't buy new planes or pay for raises. AA has nothing to show for it and the employees have nothing to show for it. Money down the drain. Had AA ordered these new 738s in 2004 or 2005, AA would at least have more new efficient airplanes to show for it and would have significantly lower fuel cost - making it more likely that AA could increase wages for all work groups.

The cynical view, of course, is that the APFA is really excited about the new 738s not for their fuel efficiency but because they represent a 33% increase in APFA staffing levels (four FAs v three FAs).

FWAAA, WN was talking about growth aircraft, but following Friday's decompression event, they might want to accelerate the retirement of the remaining 79 733's left in the fleet....

Exactly. That was the point of the final paragraph of my ealier post. WN might be joining AA in ordering new 737s in the short term, not necessarily to expand their fleet, but to replace some older 733s.

 

[eolesen]

And a slight correction.... 79 was the number of WN B733's affected by the weekend's grounding.

They still run around 170 B733's in total, which sounds comparable to AA's remaining MD80 fleet. If they have to put down airplanes, my bet will be on those 79 first...

 

[Bob Owens]

The first part is certainly true. The second part, not completely. Since 12/31/08, before any of the recent 738s arrived, AA flew 77 older 738s and had 279 active MD-80s. In the two years since then, as of 12/31/10, AA has taken delivery of 76 new 738s and has parked 55 MD-80s, so there are 21 new 738s more than the MD-80 retirements over that period. But those 21 738s don't represent expansion. Recall that in late 2008 and early 2009, AA permanently parked 34 AB6s and that many of the routes were backfilled with 763s and 757s and 738s. So there are 21 more 738s than MD-80 retirements but there are also 34 fewer AB6s. My WAG is that the new 738s are more fuel efficient than the AB6s per ASM. You can call those 21 additional 738s "increased capacity" if you want, but they're really backfilling some of the capacity of the 34 AB6 retirements.

The 34 AB6 have been gone for years, the last few well over a year ago. Comparing the ASMs on a widebody to the ASMs on a narrow body, now thats apples and oranges because you are leaving out the revenue potential of all the cargo the AB6's carried. AA has routes where the Cargo carries the full nut, the passengers are gravy such as the RDU/LHR 777.

Oil will likely get cheaper over the long term? Seriously? You may be right, but most of the industrialized world is betting the other way. For years, we've heard that China represents most of the potential market for new expansion aircraft and if true, China's consumption of jet fuel is going to explode. GM now sells more cars in China than it does here - those cars and all other makes sold in China represent a huge increase in gasoline conumption as the affluent in China buy more and more cars. Same thing in India, which also has four times the US population, just like China. Between just those two countries, there are eight USAs in population. The USA has five percent of the world's population but consumes one-fourth of the world's energy output. As people in the less-developed world begin using energy like we have, energy prices will have to increase.

China probably wont see as much growth in the next ten years as they've seen in the last ten. The reason why is that even more so than here the wealth is not distributed evenly. Most in China cant afford cars, those that can have them and thats not really changing. There will probably be more growth in Aviation for a while since the guy in charge of Chinas High Speed rail just got arrested (www.voanews.com/.../Corruption-Threatens-Chinas-High-Speed-Rail-Plan- 117575273.html) but after they find him dead from an apparant suicide from a gunshot wound to the back of the head they will jump back into it, after AA China doesnt produce much oil and they dont like to export their wealth, so HS Rail, run off electricity produced at its three gorges dam (or coal) makes more sense.The rest of the world isnt likely to use as much fossil fuel Energy as we have and we arent likely to use as much in the future as we have in the past either, the push is for efficiency and alternates in part because of polical and or enviornmental concerns not just the cost. Developing will use more but probaly never as much per capita as we do and we will use less fossil fuel energy. I would not call most of Europe developing contries yet their fossil fuel energy costs are much less than ours.

As for Boeing stock - I suspect that many mutual funds own Boeing; I also suspect that many pension funds (my own included) own Boeing stock, benefitting many union members. Over the long term, Boeing has tended to produce profits - you'd have to be an idiot to NOT own Boeing stock if you manage money for other people. Same thing for oil companies - high oil prices and high oil company profits are good for retirement funds.

They usually own airline stocks as well, why is that?

Sure, but didn't EAL have plenty of other issues as well? As eolesen pointed out, fuel prices didn't increase all that much from the time EAL ordered the A300s until EAL went out of business - so fuel cost savings were minimal. That COULD happen at AA, but IMO, fuel will go up in the future - it won't stay flat or go down in price.

Here's what Eoleson said;

The difference in fuel efficiency was negated by low fuel prices (well below $1/gal compared to >$3/gal today).

And that supports what I said about Borman buying all them new planes, fuel had surged in the early 80s, then it later went down quite a bit. $1 then is around $3 now, I'd say its a safe bet that bot yours and Eolesons income has more than tripled since then.

This is a subject where the various unions at AA are not on the same page. In this thread, you're criticising managment for buying new fuel efficient airplanes even though AA is not profitable.

No I'm criticizing management for claiming they cant pay us, I could care less what they post as far as profits. They could still buy new airplanes, just a few less per year and pay us. The amount of money they could save by having happy mechanics would probaly allow them to buy the planes anyway.

The APFA has publicly criticised management for NOT buying enough new 738s early enough - which is exactly the same as my criticism of managment. AA's delay in ordering new 738s cost AA at least a billion or perhaps two billion dollars in extra fuel cost over the past few years - and that's money that didn't buy new planes or pay for raises. AA has nothing to show for it and the employees have nothing to show for it. Money down the drain. Had AA ordered these new 738s in 2004 or 2005, AA would at least have more new efficient airplanes to show for it and would have significantly lower fuel cost - making it more likely that AA could increase wages for all work groups.
The cynical view, of course, is that the APFA is really excited about the new 738s not for their fuel efficiency but because they represent a 33% increase in APFA staffing levels (four FAs v three FAs).

New planes are in the FAs best interests, they require as you noted more FAs, new planes are not in mechanics best interests they require less maintenace. Money down the drain? Well for us it means more OT, and we need the OT to make up for the paycuts. Besides what makes you thinks that if they had bought all those planes that it wouldnt have gone down the drain to banks or that they wouldnt simply find another drain?

 

[737823]

The 34 AB6 have been gone for years, the last few well over a year ago. Comparing the ASMs on a widebody to the ASMs on a narrow body, now thats apples and oranges because you are leaving out the revenue potential of all the cargo the AB6's carried. AA has routes where the Cargo carries the full nut, the passengers are gravy such as the RDU/LHR 777.

RDU-LHR is actually a 763 and has been since late 2008. I don't think FWAAA was directly comparing the newly delivered 738s to the outgoing A300s, just in the sense that as the AB6s were retired AA shifted many planes on various routes from JFK/MIA to make up for the lost capacity. (IE some MIA-LAX segments that were once operated with 763s are now operating with 738s as the 763s are being used on Caribbean routes that are cargo heavy and formerly operated with AB6). Nonetheless, the 738s have been purchased for fleet renewal purposes rather than growth as was the case with Southwest.

No I'm criticizing management for claiming they cant pay us, I could care less what they post as far as profits. They could still buy new airplanes, just a few less per year and pay us. The amount of money they could save by having happy mechanics would probaly allow them to buy the planes anyway.



New planes are in the FAs best interests, they require as you noted more FAs, new planes are not in mechanics best interests they require less maintenace. Money down the drain? Well for us it means more OT, and we need the OT to make up for the paycuts. Besides what makes you thinks that if they had bought all those planes that it wouldnt have gone down the drain to banks or that they wouldnt simply find another drain?

What an outrageous statement. You have an interest in AA's success don't you? AA's ability to give your members pay increases depends on its profitability. Sorry you don't like the new 738s but I certainly do and as a customer its high time AA get rid of the AAntiquated MD-80s. Even though its fare from the truth, if you want to believe it was your concessions that financed their delivery, I'm all the more happier each time I set foot on a 738.

Josh

 

[Hopeful]

Is AA BUYING these aircraft through financing, or are they LEASING?
I cannot see ANY airline forking over $50-70 million outright for each one of these.

I've always wondered about airline purchases of new aircraft....Downpayment? Lease? Finance?
Which one is AA utilizing?

For each deleiver AA takes, is AA paying up front?

 

[FWAAA]

Is AA BUYING these aircraft through financing, or are they LEASING?
I cannot see ANY airline forking over $50-70 million outright for each one of these.

I've always wondered about airline purchases of new aircraft....Downpayment? Lease? Finance?
Which one is AA utilizing?

For each deleiver AA takes, is AA paying up front?

AA (and all other airlines) must make pre-delivery downpayments to Boeing. When the plane is delivered, AA pays Boeing for the plane. For some of the deliveries, AA has borrowed the money and for others, the plane is leased from someone else who pays Boeing for the plane. Horton mentioned last year that because of AA's very advantageous purchase price terms, AA is able to borrow more money per plane than the delivery price - so each delivery is a cash-positive event.

Like if you agreed to pay $25k for a new vehicle, put 20% down ($5,000) and then convinced the bank to loan you $25k against the $20k remaining purchase price. When you pick up the new vehicle, you're able to put that down payment back in your pocket - in a nutshell, that's what AA is doing. Very close to 100% financing. And as I've pointed out, the fuel savings and the maintenance holiday are enough to make those payments.

AA is paying significantly less than $50 million per copy. My estimate is more like $35 million to $40 million, but the actual purchase price is a very closely guarded secret. What is fairly certain is that no airline is getting a better price than AA.

Southwest has been financing its new 73Gs lately, but a few years ago, it was simply writing a check for each delivery. It's possible to pay cash for new planes (and even cars).

 

[Hopeful]

AA (and all other airlines) must make pre-delivery downpayments to Boeing. When the plane is delivered, AA pays Boeing for the plane. For some of the deliveries, AA has borrowed the money and for others, the plane is leased from someone else who pays Boeing for the plane. Horton mentioned last year that because of AA's very advantageous purchase price terms, AA is able to borrow more money per plane than the delivery price - so each delivery is a cash-positive event.

Like if you agreed to pay $25k for a new vehicle, put 20% down ($5,000) and then convinced the bank to loan you $25k against the $20k remaining purchase price. When you pick up the new vehicle, you're able to put that down payment back in your pocket - in a nutshell, that's what AA is doing. Very close to 100% financing. And as I've pointed out, the fuel savings and the maintenance holiday are enough to make those payments.

AA is paying significantly less than $50 million per copy. My estimate is more like $35 million to $40 million, but the actual purchase price is a very closely guarded secret. What is fairly certain is that no airline is getting a better price than AA.

Southwest has been financing its new 73Gs lately, but a few years ago, it was simply writing a check for each delivery. It's possible to pay cash for new planes (and even cars).

Thanks, good info.
I'm sure an airline could pay cash, but given today's world, I can't see ANY airline doing that! Let alone AA!