What Is "other"

[Raptor]

Well there are different degrees to which someone can lose. Better to lose after a good fight than to just get your butt kicked without landing at least a few against your opponent right? At the very least, if you hit him hard enough he will respect you.

[post="201482"][/post]​

I absolutly agree Bob and I could not have said it any better.

 

[FWAAA]

Mr Owens, with all due respect, you are comparing apples to oranges. The ATA categories do not line up with AMR's financial statements. See below for specifics.

In 1991, that category made up 16.73% of AMR's total operating expenses, and has steadily declined to 13.28% in 2003. So far in 2004, "other" makes up only 12.78% of total operating expenses.

Thats still a lot. Especially when you consider that such things as Aircraft Insurance are catagorized seperately=0.2%.

The ATA Aircraft Insurance category does not appear as a separate category on AMR's financials. AMR lumps insurance in with "other."

What is included in other operating expenses at AMR?

Data processing expense,

Communication? 1.1%

No, AMR includes its data processing expense in "other," notwithstanding the ATA's cost index category.

employee travel and incidental expense (primarily hotel and per diem for flight crews),

Labor? 32.4%

Incorrect. Employee hotel and per diem are NOT included in "Labor" (called "Wages, salaries and benefits" on AMR's statements) on AMR's financials. They are included in "other."

insurance expense (liability and casualty coverage),

Which Aircraft or Non-aircraft? Both have their own catagory. 0.2 and 0.8 respectively.

No, AMR's financials do not break out insurance separately, insurance is included in "other."

security expense (paid to the TSA, equal to AA's 2001 expenses for screening),

OK, that might account for the 2.6% rise between 2000 and 2001.

advertising expense (steadily declining over the last few years),

Do you mean Advertising and Promotion? 0.8%

No, AMR's financials include advertising and promotion in "other." In 2003, advertising was $150 million, or 6.2% of its "other" category.

credit card fees

I thought that was income?

No, AMR pays a discount of 1%+ of its revenues to the various credit card companies - Visa, MC, Diners, Amex and all the others charge merchants a percent or more of each transaction (Diners and Amex are generally 2%+). You know that. Don't you?

When passengers pay with a credit card (as most do these days), the merchant (AA) suffers a hit of at least one percent. That's what pays for the credit card processing when customers pay off their balance each month. All merchants pay these expenses.

Nevertheless, these credit card fees are included in AMR's Commissions category of its 10-K, so they are not included in "other." My bad. In the old days, AMR put the credit card expenses in the "other" category. Now, the credit card fees are included in the Commissions category.

as well as typical business expenses like professional fees,

Professional Fees =8.3%

No, AMR does not break out its professional fees separately on its financials - parasite fees are part of "other."

utility bills, postage, etc.

Utilities and Office Supplies =0.8%

No, no such category exists on the AMR financials. You have quoted the ATA industry number, not what AMR pays.

So all except for TSA fees are itemized seperately by the ATA from "Other.

No, just because the ATA reports various expense categories has no bearing on AMR's financials. My post listed the various expenses that AMR includes in "other" even though they may be itemized on the ATA cost index charts.

[post="201414"][/post]​

For some evidence of what is included in "other operating expense" on AA's financials, see the bottom of page 29 of AMR's 2003 10-K:

Other operating expenses decreased primarily due to decreases in (i) data processing expenses of $87 million due primarily to introducing further efficiencies into data processing environments resulting in reduced consumption, and negotiating more favorable terms with vendors; (ii) travel and incidental costs of $61 million due primarily to decreased overnight stays for pilots and flight attendants as a result of changes in the scheduling of flights, lower average hotel rates, work rule changes and lower per diems; (iii) insurance costs of $44 million due primarily to lower premiums, (iv) security costs of $31 million due primarily to the assumption of certain security services by the Transportation Security Administration (TSA) and the suspension of security services payments to the TSA from June 1, 2003 to September 30, 2003 and (v) contract maintenance work that American performs for other airlines of $29 million.

http://www.shareholder.com/aa/EdgarDetail....-2668&SID=04-00

Here's some clues about what is included in "other" from the 1996 10-K (page 21/23 - two different page numbers on each page):

Miscellaneous operating expenses (including outsourced services, data processing services, booking fees, credit card fees, crew travel expenses, advertising and communications costs) increased by 1.3 percent or $33 million, including a $26 million charge in 1996 to write down the value of aircraft interiors American plans to refurbish.

http://www.shareholder.com/aa/EdgarDetail....-2243&SID=97-00

Note that the 1996 "other operating expense" category included outsourced services, data processing services, booking fees, credit card fees, crew travel expenses, advertising and communications costs. B)


AMR's financials break down the expenses into the following categories:

Wages, salaries and benefits
Aircraft fuel
Depreciation and amortization
Other rentals and landing fees
Commissions, booking fees and credit card expense
Maintenance, materials and repairs
Aircraft rentals
Food service
Other operating expenses
Special charges
U.S. government grant

Note that these categories do not correspond to the categories used by the ATA for its industrywide cost index data.

And while it is true that industrywide, the "other" category has increased substantially over the past 30 years, the fact remains that AMR has reduced its "other operating expenses" substantially over the past 13 years.

I'd be willing to bet that Arpey and the other execs are hammering the "other" expenses just as hard as they have hammered you. I'm also able to understand that you probably disagree.

I'm still hoping that AA's employees can get back to industry-leading wages once it can afford them. Good luck with the AMFA v. TWU struggle.

 

[Bob Owens]

Mr Owens, with all due respect, you are comparing apples to oranges. The ATA categories do not line up with AMR's financial statements.

So! You are the one that brought the oranges in, I didnt mention AA, you did.


Note that the 1996 "other operating expense" category included outsourced services, data processing services, booking fees, credit card fees, crew travel expenses, advertising and communications costs. B)
AMR's financials break down the expenses into the following categories:

Wages, salaries and benefits
Aircraft fuel
Depreciation and amortization
Other rentals and landing fees
Commissions, booking fees and credit card expense
Maintenance, materials and repairs
Aircraft rentals
Food service
Other operating expenses
Special charges
U.S. government grant

Note that these categories do not correspond to the categories used by the ATA for its industrywide cost index data.

And while it is true that industrywide, the "other" category has increased substantially over the past 30 years, the fact remains that AMR has reduced its "other operating expenses" substantially over the past 13 years.

Well, as you just pointed out AMRs "other" does not correspond to the ATAs "other". So if were to make them the same perhaps your statement would no longer be correct, perhaps its "other" would be headed in the same direction as the rest of the industry. By the way how has AMRs labor costs as a percentage of operating expenses compare?

I'd be willing to bet that Arpey and the other execs are hammering the "other" expenses just as hard as they have hammered you. I'm also able to understand that you probably disagree.

Well the ATAs figures certainly do not reflect that now do they?


I'm still hoping that AA's employees can get back to industry-leading wages once it can afford them. Good luck with the AMFA v. TWU struggle.

Thanks.

[post="201529"][/post]​

 

[Bob Owens]

No, AMR pays a discount of 1%+ of its revenues to the various credit card companies - Visa, MC, Diners, Amex and all the others charge merchants a percent or more of each transaction (Diners and Amex are generally 2%+). You know that. Don't you?


Sure but then why is AA giving seats away through advantage miles?Doesnt income from one offset expense for the other? In other words when the passenger buys his once or twice a year ticket on AA the company pays the Credit card company a fee but everytime that same person uses his advantage card to buy gas, clothes, dinner or other bills that have nothing to do with the airlines AA gets a fee even if the person never actually cashes in those miles. In the meantime the company carries those miles as a liability, then when they want to claim that things are really bad they turn around and write those liabilities off as part of their losses for the year. This way they can pump that figure up to $3.5 billion and scare the hell out of their employees and get industry leading concessions!

 

[Bob Owens]

Dug this out of the archives. Its from when the Flight attendants were trying to get a new contract.

This is from page 11 of issue no.2 of "Skyword" our APFA magazine.
It's entitled American Airlines Spending Spree.
All of my 0's are directly from this pg.
AA Arena, Miami, Fl.------------------------------------$ 42,000,000.00
AA Center, Dallas Tx.-----------------------------------$ 195,000,000.00
AA Theatre, NYC------------------------------------------$ 8,500,000.00
777 First Class suite seats ---------------------------$2,880,000.00
Overhead bin Replace. --------------------------------$ 80,000,000.00
(F100, S80, 757)
More Leg Room M/C------------------------------------ $ 70,000,000.00
Interior Upgrades ---------------------------------------- $ 400,000,000.00
MIA Terminal Expansion ------------------------------ $ 200,000,000.00
JFK Terminal Expansion -- ----------------------------$ 1,300,000,000.00
LAX Terminal Expansion------------------------------- $ 245,000,000.00
BOS Terminal Expansion ------------------------------ $ 270,000,000.00
DFW Terminal B ------------------------------------------- $ 120,000,000.00
SJU Eagle Terminal --------------------------------------- $ 6,000,000.00
Reno Airlines -------------------------------------------------$124,000,000.00
TWA Debtor-in Possession Financing-------------- $ 325,000,000.00
TWA Aquisition -------------------------------------------- $ 742,000,000.00
TWA Debt Assumption -----------------------------------$ 3,500,000,000.00
AA Customer Service Enhancement Programs-- $ 3,500,000.00
The Gov. of Mexico
for the Education of Immigrants ----------------------- $ 1,3000,000.00
George Bush's Presidential Campaign -------------- $100,000.00

TOTAL $ 7,661,200,000.00




At present the company claims to have $20 billion in debt. From the frivolous expenses above, we can see where nearly $7.7billion of that debt comes from.

 

[FWAAA]

Leave it to the APFA to botch the numbers and to neglect to point out the relevant time frame for these "frivolous expenditures."

Let's review some of the numbers:

The AA Arena sponsorship is a $2.1 million annual expense thru 2019 (20 year deal).

The AA Center sponsorship is a $6.5 million annual expense thru 2031 (30 year deal).

Note that most of this money hasn't yet been "spent." Total of $8.6 million/year. Reasonable people can differ on whether AA gets any value from this $8.6 million, but it really amounts to pocket change. But then again, you and Stewart quibbled over AA's relatively modest ad budget. Even though WN spends 3 times as much as AA, per dollar of revenue. If AA spent as large a percentage as WN, AA's annual ad budget would be nearly $500 million instead of just $150 million. Perhaps AA needs more stadium deals.

The LAX expansion/renovation was about $300 million (more expensive than the list indicates), and was begun in 1998.

The TWA DIP financing was subtacted from the $742 million that AA agreed to pay in cash for TWA's assets, so that's an extra $325 million (it's counted twice).

http://www.cbsnews.com/stories/2001/01/08/...ain262243.shtml

http://archives.cnn.com/2001/BUSINESS/03/08/twa.reut/

AA merely advanced TWA up to $325 million against the purchase price.

Further, the $3.5 billion of assumed TWA obligations is similarly overstated, to the tune of $1.4 billion. From the 2002 10-K:

3. ACQUISITION OF TWA ASSETS

On April 9, 2001, American purchased substantially all of the assets of TWA and assumed certain liabilities. TWA was the eighth largest U.S. carrier, with a primary domestic hub in St. Louis. American funded the acquisition of TWA's assets with its existing cash and short-term investments. The acquisition of TWA was accounted for under the purchase method of accounting and, accordingly, the operating results of TWA since the date of acquisition have been included in the accompanying consolidated financial statements for the year ended December 31, 2001.

The accompanying consolidated financial statements reflect the allocation of the purchase price, which was based on estimated fair values of the assets acquired and liabilities assumed. American paid approximately $742 million in cash (subject to certain working capital adjustments) for the purchase of TWA, which included the $625 million purchase price paid to TWA and various other acquisition costs, primarily the purchase of aircraft security deposits and prepaid rent, and assumed the following obligations: $638 million in current liabilities, $734 million in postretirement benefits other than pensions, $519 million in capital lease obligations and approximately $175 million of other long-term liabilities. The purchase price was allocated as follows: approximately $812 million to current assets, $574 million to fixed assets, primarily capital lease aircraft, and approximately $320 million to other assets, resulting in goodwill of approximately $1 billion, which is being amortized on a straight-line basis over 40 years.

http://www.shareholder.com/aa/EdgarDetail....-1661&SID=02-00

Sum of the assumed liabilities was actually only $2.07 billion. To be fair to the APFA, the assumed liability figure mentioned in the press had been $3.5 billion at the time of the announcements of the acquisition, but the actual number was much smaller.

Many of the other capital expenditures on the list were announced in 1998, 1999 and 2000. Amazing how much revenue AMR has seen since these capital improvements were announced beginning in 1998: $122.9 billion thru the 3rd quarter of 2004. That's a staggering amount of money. Since AMR doesn't have any of that money left over, one could make the case that all of the expenditures were frivolous, no? Over $40 billion of that $122.9 billion was wages and salaries. Any of those expenditures frivolous?

I'm also curious as to why the capital expenditures on the list are all deemed to be "frivolous." Lots of capital spending didn't make the list. Is that because it is deemed to be OK?

What about the 77 brand new 737-800s delivered beginning in 1999? Or the 45 new 777s in the same period? What about the 16 new 757s? How about the 17 new 763s? Or the more than 200 RJs delivered in the same period? These new airplanes cost many billions of dollars. Were those frivolous expenditures as well?

Why is the $483 million for new F seats, larger o/h bins and various new seats (all new F and J plus many new coach seats) deemed to be frivolous? Those expenditures were all made when the company was rolling in cash (and paying out about $300 million/year in profit sharing to the employees).

Sure but then why is AA giving seats away through advantage miles?Doesnt income from one offset expense for the other? In other words when the passenger buys his once or twice a year ticket on AA the company pays the Credit card company a fee but everytime that same person uses his advantage card to buy gas, clothes, dinner or other bills that have nothing to do with the airlines AA gets a fee even if the person never actually cashes in those miles. In the meantime the company carries those miles as a liability, then when they want to claim that things are really bad they turn around and write those liabilities off as part of their losses for the year. This way they can pump that figure up to $3.5 billion and scare the hell out of their employees and get industry leading concessions!

My bad for introducing the oranges to the discussion. Now you've brought pears into the mix. :angry:

Yes, AA's revenues from the sale of AAdvantage miles exceeds its credit card fees by a substantial amount each year, but your thread asked what was included in "other expenses" and I pointed out that AA used to count the credit card fees in its "other expense" column. Sale of miles to Citi and other partners is included in Revenue, and this thread really isn't about revenue, is it?

You lost me when you said "then when they want to claim that things are really bad they turn around and write those liabilities off as part of their losses for the year." Are you talking about the goodwill or the AAdvantage liability? They are two separate liabilities.

Of the $1.2 billion liability mentioned in the 10-K relating to AAdvantage, more than 80% of that is charged to air traffic liability, which is a fancy way of saying "future travel already paid for and for which the company is liable." Simply put, AA is carrying about $1 billion of liability to balance the $1 billion of AAdvantage miles sold to partners. No different than the liability resulting from advance cash purchases of tickets by passengers. This liability is not "written off" the same way the goodwill was written off.

It's a shame that you seem to focus solely on the accounting loss reported by AMR for 2002, which included the write down of all of the goodwill, among many other noncash expenses. As we have discussed before, the total cash loss was just about $1.8 billion (about $5 million/day), which magically equaled the amount of the total wage reductions from organized and non-represented employees.

If the contribution to Pres. Bush's campaign was frivolous, how would you characterize the company's similar contribution to Kerry's campaign (and to Gore in 2000)? Or is it just frivolous to donate to the winner?

 

[Bob Owens]

FWAAA,Nov 30 2004, 08:44 PM]
Leave it to the APFA to botch the numbers and to neglect to point out the relevant time frame for these "frivolous expenditures."

Let's review some of the numbers:

The AA Arena sponsorship is a $2.1 million annual expense thru 2019 (20 year deal).

So? Is it or is it not part of the $20 billion "Booh" factor that the airline used to get us to give "more than adequate concessions"?

The AA Center sponsorship is a $6.5 million annual expense thru 2031 (30 year deal).

Same question as above?

Note that most of this money hasn't yet been "spent." Total of $8.6 million/year. Reasonable people can differ on whether AA gets any value from this $8.6 million, but it really amounts to pocket change.

Well all that pocket change adds up. $8.6 million could cut the cost of our medical. That little bit of pocket change is needed by us.


But then again, you and Stewart quibbled over AA's relatively modest ad budget. Even though WN spends 3 times as much as AA, per dollar of revenue.

WN didnt demand huge concessions from their employees.

If AA spent as large a percentage as WN, AA's annual ad budget would be nearly $500 million instead of just $150 million. Perhaps AA needs more stadium deals.

Maybe they need management like WN has.AS long as they pay me what I'm supposed to be getting I dont care where they blow the rest of it.

The LAX expansion/renovation was about $300 million (more expensive than the list indicates), and was begun in 1998.

The TWA DIP financing was subtacted from the $742 million that AA agreed to pay in cash for TWA's assets, so that's an extra $325 million (it's counted twice).

http://www.cbsnews.com/stories/2001/01/08/...ain262243.shtml

http://archives.cnn.com/2001/BUSINESS/03/08/twa.reut/

AA merely advanced TWA up to $325 million against the purchase price.

Further, the $3.5 billion of assumed TWA obligations is similarly overstated, to the tune of $1.4 billion. From the 2002 10-K:
http://www.shareholder.com/aa/EdgarDetail....-1661&SID=02-00

Sum of the assumed liabilities was actually only $2.07 billion. To be fair to the APFA, the assumed liability figure mentioned in the press had been $3.5 billion at the time of the announcements of the acquisition, but the actual number was much smaller.

The opposite of our concessions, which were valued at much less than what the company actually got.

Many of the other capital expenditures on the list were announced in 1998, 1999 and 2000. Amazing how much revenue AMR has seen since these capital improvements were announced beginning in 1998: $122.9 billion thru the 3rd quarter of 2004. That's a staggering amount of money. Since AMR doesn't have any of that money left over, one could make the case that all of the expenditures were frivolous, no? Over $40 billion of that $122.9 billion was wages and salaries. Any of those expenditures frivolous?

For a service company, one where the customer simply walks away in a different place what should the largest expense be? Less than 1/3? They got off cheap.

I'm also curious as to why the capital expenditures on the list are all deemed to be "frivolous." Lots of capital spending didn't make the list. Is that because it is deemed to be OK?

What about the 77 brand new 737-800s delivered beginning in 1999? Or the 45 new 777s in the same period? What about the 16 new 757s? How about the 17 new 763s? Or the more than 200 RJs delivered in the same period? These new airplanes cost many billions of dollars. Were those frivolous expenditures as well?

You are starting to babble.

Why is the $483 million for new F seats, larger o/h bins and various new seats (all new F and J plus many new coach seats) deemed to be frivolous? Those expenditures were all made when the company was rolling in cash (and paying out about $300 million/year in profit sharing to the employees).


$300 million in profit sharing while enjoying billions in concessions. Giving up $10 to $20K a year in wages for a $1500 check, maybe, is not a good deal.

My bad for introducing the oranges to the discussion. Now you've brought pears into the mix. :angry:

Well, what the heck, after you threw in the oranges who cares?

Yes, AA's revenues from the sale of AAdvantage miles exceeds its credit card fees by a substantial amount each year, but your thread asked what was included in "other expenses" and I pointed out that AA used to count the credit card fees in its "other expense" column. Sale of miles to Citi and other partners is included in Revenue, and this thread really isn't about revenue, is it?

It was about the ATAs report on airline Industry Expenses and the huge increase in "Other". You were the one who made AMR the subject of the discussion.

You lost me when you said "then when they want to claim that things are really bad they turn around and write those liabilities off as part of their losses for the year." Are you talking about the goodwill or the AAdvantage liability? They are two separate liabilities.

You mean I didnt lose you at Hello? Does it matter?

Of the $1.2 billion liability mentioned in the 10-K relating to AAdvantage, more than 80% of that is charged to air traffic liability, which is a fancy way of saying "future travel already paid for and for which the company is liable." Simply put, AA is carrying about $1 billion of liability to balance the $1 billion of AAdvantage miles sold to partners. No different than the liability resulting from advance cash purchases of tickets by passengers. This liability is not "written off" the same way the goodwill was written off.

It is different in that there is a good chance that a lot of that $1.2 billion may never be cashed in or used for flights. Besides what values are they using for the write off? If ticket prices are declining then by writing them off, at the highest price, the real liability is actually much much less. Everyone knows how a $500 passnenger could be sitting next to the $79 passenger. If AA writes off all that liability at the higher rate didnt they in effect "hedge" that liability under the assmuption that fares are going down? And didnt that hedge give employees an inaccurate impression of the companies financial difficulties?


You have to admit that subtracting the $1.2 billion for AAdvantage plus the $988 million, or almost 2.1 Billion would have not made quite the same impression as saying "We lost $3.5 billion".


It's a shame that you seem to focus solely on the accounting loss reported by AMR for 2002, which included the write down of all of the goodwill, among many other noncash expenses. As we have discussed before, the total cash loss was just about $1.8 billion (about $5 million/day), which magically equaled the amount of the total wage reductions from organized and non-represented employees.


Exactly. So in other words the company put all their real losses on our shoulders.We are being expected to work at a wage that will guarantee that the company makes money no matter how bad the economy is, no matter how badly mismanaged it is and only expect to get any sort of a reprieve after they make at least $500 million in profits.



If the contribution to Pres. Bush's campaign was frivolous, how would you characterize the company's similar contribution to Kerry's campaign (and to Gore in 2000)? Or is it just frivolous to donate to the winner?


Me personally? I think that all such contributions by anyone, or anything that does not have the right to cast a ballot should be illegal. Politics should only be for people.

 

[FWAAA]

So? Is it or is it not part of the $20 billion "Booh" factor that the airline used to get us to give "more than adequate concessions"?

Well all that pocket change adds up. $8.6 million could cut the cost of our medical. That little bit of pocket change is needed by us.

Maybe they need management like WN has.AS long as they pay me what I'm supposed to be getting I dont care where they blow the rest of it.

Many of the other capital expenditures on the list were announced in 1998, 1999 and 2000. Amazing how much revenue AMR has seen since these capital improvements were announced beginning in 1998: $122.9 billion thru the 3rd quarter of 2004. That's a staggering amount of money. Since AMR doesn't have any of that money left over, one could make the case that all of the expenditures were frivolous, no? Over $40 billion of that $122.9 billion was wages and salaries. Any of those expenditures frivolous?

I'm also curious as to why the capital expenditures on the list are all deemed to be "frivolous." Lots of capital spending didn't make the list. Is that because it is deemed to be OK?

What about the 77 brand new 737-800s delivered beginning in 1999? Or the 45 new 777s in the same period? What about the 16 new 757s? How about the 17 new 763s? Or the more than 200 RJs delivered in the same period? These new airplanes cost many billions of dollars. Were those frivolous expenditures as well?

You are starting to babble.

It is different in that there is a good chance that a lot of that $1.2 billion may never be cashed in or used for flights. Besides what values are they using for the write off? If ticket prices are declining then by writing them off, at the highest price, the real liability is actually much much less. Everyone knows how a $500 passnenger could be sitting next to the $79 passenger. If AA writes off all that liability at the higher rate didnt they in effect "hedge" that liability under the assmuption that fares are going down? And didnt that hedge give employees an inaccurate impression of the companies financial difficulties?

You have to admit that subtracting the $1.2 billion for AAdvantage plus the $988 million, or almost 2.1 Billion would have not made quite the same impression as saying "We lost $3.5 billion".

Exactly. So in other words the company put all their real losses on our shoulders.We are being expected to work at a wage that will guarantee that the company makes money no matter how bad the economy is, no matter how badly mismanaged it is and only expect to get any sort of a reprieve after they make at least $500 million in profits.

Me personally? I think that all such contributions by anyone, or anything that does not have the right to cast a ballot should be illegal. Politics should only be for people.

[post="204963"][/post]​

No matter how many times you repeat your error, the fact remains that the $1.2 billion AAdvantage liability was NOT part of the $3.5 billion loss for 2002. It's not an annual write-off. It never is. It represents two things: the air traffic liability sold to Citi and the other buyers of miles, and, in addition, AA's liability for miles it has given to its frequent flyers. The $1.2 billion breaks down roughly as 80% miles sold (for cash) and 20% miles given away. Each month, AA reduces that liability as it provides the air traffic (flights) to the customers, but also increases it for miles sold to Citi and the others. The number is thus a permanent entry on the balance sheet and has grown slowly since 1981, when AA dreamed up the scheme.

You are partially correct when you say that AA did not burn thru $3.5 billion in 2002. That number included a writeoff of all of its remaining goodwill of $988 million. The accountants' regulatory body required that writeoff, and likewise, the SEC would have had a complaint if AA had not written it off in compliance with GAAP standards. Additionally, the 2002 loss included an annual depreciation and amortization deduction representing the annual expense from all those former years' frivolous capital expenditures. But nowhere in the income statement (for any year) is the $1.2 billion written off. I'm certain I'm correct, but if you can prove me wrong on the $1.2 billion, I'm all ears. Just point out where on the one page income statement for 2002 the $1.2 billion AAdvantage liability appears. I'm big enough to admit my mistakes. But in this case, I'm correct.

You really ought to take an accounting course. Seriously. Maybe a course at the local community college for beginning investors where reading and understanding financial statements is the focus.

I've explained it before, but either you didn't read my explanations or you just don't believe reality. For each free ticket AA assumes flyers will redeem, AA assigns a liability of about $25, in line with every other airline.

The aggregate liability for the multi-year stadium naming sponsorships are indeed included in the $20 billion "boo factor."

But most of the money has not yet been spent. As with the St Louis stadium deal, AA could get out of the obligation if management thought that was the better business decision. Recall that AA put its name on the St Louis facility (renegotiated TWA's deal) and then negotiated its way out of it in 2002. No matter how you slice it, the $8.6 million annual amount is a very small part of AA's relatively small advertising and promotion budget.

I just did a Google News search on "American Airlines" and retrieved thousands of recent news stories in hundreds of newspapers across the country in which the two arenas appeared. NBA fans see "American Airlines Center" daily in recaps of the Mavs and Heat games. But hey, you're smarter than management, and so that exposure must be a bad deal. It would lower the cost of your medical, so there you go, the expense must be frivolous.

You take at face value some numbers provided by the flight attendants and then opine that the capital expenditures on the list are "frivolous." I agree that some of them are. But you provide no reasoning or explanation as to why all of them are frivolous. I then point out many other capex items and ask you if they are frivolous as well. Your response: "You are starting to babble."

I take it by your response that you have no intellectual argument (nor even an emotional one) to support your assertions that the capital expenses on the list are "frivolous."

The company demanded concessions because it was running out of money and was out of options. It had borrowed billions in 2001 and 2002 to fund its operating losses (and, yes, some foolish expenditures), but the lenders had said "no more unless you cut spending." It's what parents do when they are asked by their kids to bail them out of foolish overspending. Of course AA demanded that the employees slash their pay and benefits. Where else was AA going to find an immediate $1.8 billion in reductions? Can't very well tell the oil companies that it wasn't going to pay for fuel, could it?

Too bad you and your brothers didn't buy the company in early 2003 when it was real cheap. Then you could pay yourselves whatever you are "supposed to be getting." Of course that strategy didn't pan out so well at UAL over the past few year now, did it? Maybe if the hard-working represented employees of AA had bought the company, you could have hired "good managers" (however you might define that term) and everything would have turned out OK.

On the last point about political contributions: I agree. Political contributions should be made with one's own personal money, and not someone else's. But give someone a big pot of money, be they management or union, and it becomes real easy to spend it on politicians.

Still hoping that AA is one of the survivors and that AA's employees' wages can be industry leading again someday, when the losses turn to profits. Plunging oil prices might help that happen.

 

[Bob Owens]

No matter how many times you repeat your error, the fact remains that the $1.2 billion AAdvantage liability was NOT part of the $3.5 billion loss for 2002. It's not an annual write-off. It never is. It represents two things: the air traffic liability sold to Citi and the other buyers of miles, and, in addition, AA's liability for miles it has given to its frequent flyers. The $1.2 billion breaks down roughly as 80% miles sold (for cash) and 20% miles given away. Each month, AA reduces that liability as it provides the air traffic (flights) to the customers, but also increases it for miles sold to Citi and the others. The number is thus a permanent entry on the balance sheet and has grown slowly since 1981, when AA dreamed up the scheme.

OK, so you claim that it was not a part of the $3.5billion. I have yet to see an exact breakdown of what that $3.5 billion was but I'll take your word for it. But, is that $1.2 billion part of the $20Billion booh factor or not?

You are partially correct when you say that AA did not burn thru $3.5 billion in 2002. That number included a writeoff of all of its remaining goodwill of $988 million. The accountants' regulatory body required that writeoff, and likewise, the SEC would have had a complaint if AA had not written it off in compliance with GAAP standards.

And those standards are designed to protect the investors interests not the employees right?

Additionally, the 2002 loss included an annual depreciation and amortization deduction representing the annual expense from all those former years' frivolous capital expenditures.

Are you sure that is was just an annual figure? Doesnt the law allow the company to accellerate or defer depreciation?


But nowhere in the income statement (for any year) is the $1.2 billion written off. I'm certain I'm correct, but if you can prove me wrong on the $1.2 billion, I'm all ears. Just point out where on the one page income statement for 2002 the $1.2 billion AAdvantage liability appears. I'm big enough to admit my mistakes. But in this case, I'm correct.

Look I dont care if it was written off or not, thats the IRS's problem. My concern is that all these numbers are construed to make it look like the company is in worse shape than it really is and that the concessions we gave were unneccissary.

You really ought to take an accounting course. Seriously. Maybe a course at the local community college for beginning investors where reading and understanding financial statements is the focus.

Once again, financial statements are designed to protect the investor, it is not a good benchmark, especially during poor economic conditions for us to use to sign long term concessionary agreements.


The aggregate liability for the multi-year stadium naming sponsorships are indeed included in the $20 billion "boo factor."

But most of the money has not yet been spent. As with the St Louis stadium deal, AA could get out of the obligation if management thought that was the better business decision. Recall that AA put its name on the St Louis facility (renegotiated TWA's deal) and then negotiated its way out of it in 2002. No matter how you slice it, the $8.6 million annual amount is a very small part of AA's relatively small advertising and promotion budget.

Since "price is king" and the only thing that passengers look for is price, then yes, paying to put an already well recognized logo on Sports Staduims etc is a waste of money and instead of blowing it on stuff like that they should take care of their employees.

I just did a Google News search on "American Airlines" and retrieved thousands of recent news stories in hundreds of newspapers across the country in which the two arenas appeared. NBA fans see "American Airlines Center" daily in recaps of the Mavs and Heat games. But hey, you're smarter than management, and so that exposure must be a bad deal. It would lower the cost of your medical, so there you go, the expense must be frivolous.

You take at face value some numbers provided by the flight attendants and then opine that the capital expenditures on the list are "frivolous." I agree that some of them are. But you provide no reasoning or explanation as to why all of them are frivolous. I then point out many other capex items and ask you if they are frivolous as well. Your response: "You are starting to babble."

Thats because the topic was about how "other" expenses is the fastest growing expense in the industry, one that is only surpassed by Labor and fuel. Maybe we need to take a closer look at this instead of raping the employees who have consistantly delivered higher productivity over the last twenty years.

I take it by your response that you have no intellectual argument (nor even an emotional one) to support your assertions that the capital expenses on the list are "frivolous."


Which ones?

The company demanded concessions because it was running out of money and was out of options. It had borrowed billions in 2001 and 2002 to fund its operating losses (and, yes, some foolish expenditures), but the lenders had said "no more unless you cut spending." It's what parents do when they are asked by their kids to bail them out of foolish overspending. Of course AA demanded that the employees slash their pay and benefits. Where else was AA going to find an immediate $1.8 billion in reductions? Can't very well tell the oil companies that it wasn't going to pay for fuel, could it?

Maybe they should look at the next largest expense,the one that the ATA classifies as "other". The fact is that we should have let AA go BK, join UAL and USAIR, Delta would have been right behind us, then let them sort out what they are going to do when 60% of the air transport system shuts down. Instead we were forced to make the sacrifice in order for Disney to charge whatever they want, the hotels to charge whatever they want, the airports to keep collecting their landing and usage fees, the lessors to collect their leases and yes the fuel companies to double the price of fuel.

Too bad you and your brothers didn't buy the company in early 2003 when it was real cheap. Then you could pay yourselves whatever you are "supposed to be getting." Of course that strategy didn't pan out so well at UAL over the past few year now, did it? Maybe if the hard-working represented employees of AA had bought the company, you could have hired "good managers" (however you might define that term) and everything would have turned out OK.

No, we need to shut the whole thing down. Lets see how all the other industries that make money thanks to the service we provide make out then. If cheap airfares are a must like cheap mass transit then let the government fund it like they do mass transit and not by driving our wages down.

On the last point about political contributions: I agree. Political contributions should be made with one's own personal money, and not someone else's. But give someone a big pot of money, be they management or union, and it becomes real easy to spend it on politicians.

Still hoping that AA is one of the survivors and that AA's employees' wages can be industry leading again someday, when the losses turn to profits. Plunging oil prices might help that happen.

Not without a strike it wont.

[post="205525"][/post]​

 

[Drippy Quill]

Well, well well....I'd say ole Bobby got spanked, and I mean in a big way. Bobby..I'd say you need to stay a mechanic and leave the direction of our company to those that have it in their ability to guide us out of this dilema...not into BK as you so describe to.....well done FWAAA and some real good info and insight.

 

[Bob Owens]

Well, well well....I'd say ole Bobby got spanked, and I mean in a big way. Bobby..I'd say you need to stay a mechanic and leave the direction of our company to those that have it in their ability to guide us out of this dilema...not into BK as you so describe to.....well done FWAAA and some real good info and insight.

[post="205572"][/post]​

Oh really, on what points was I spanked? Be specific, if you are able.

 

[FWAAA]

The fact is that we should have let AA go BK, join UAL and USAIR, Delta would have been right behind us, then let them sort out what they are going to do when 60% of the air transport system shuts down. Instead we were forced to make the sacrifice in order for Disney to charge whatever they want, the hotels to charge whatever they want, the airports to keep collecting their landing and usage fees, the lessors to collect their leases and yes the fuel companies to double the price of fuel.

[post="205543"][/post]​

Mr Owens, last time I posted that it appeared that your view was "We should have voted no and allowed (caused) AA to file Ch 11," you jumped all over me. I'm too lazy to search for the thread and link it.

But here it looks like your position is "We should have taken our chances in Ch 11."

And now your solution to the problem of "My employer has too little money" is to call for an industry-wide strike?

"Shut it down"?

No need to do that. Once USAir and UAL shut down (as they are bound to, once they slash their employees' pay and benefits yet again), the remaining legacy airlines will have a decent shot at survival.

Today, an article mentioned that AA would have been profitable this year were it not for fuel. Good news is that oil prices continued to plunge today.

http://biz.yahoo.com/ap/041202/american_airlines_jobs_3.html

I'm not gonna make any friends here with this next one, but here goes:

It is long past time for USAir and UAL to shut down and go out of business. And the sooner, the better. Their screwing around in BK has done far more harm to your wages and benefits than anything AA did in early 2003. Sometimes you gotta jetison some deadweight to keep the ship afloat (or in the air). And USAir and UAL are dragging everyone down.

AA's management isn't currently hurting you (they did that last year). AA's customers aren't hurting you. Not even Southwest or jetBlue or Frontier or AirTran are causing the problem.

UAL and USAir aren't paying their bills, and they are dragging down AA (as well as CO, NW and DL).

Too much fancy-pants airline capacity. Period.

 

[AMFAMAN]

FWAAA,

A little bit off the subject but since the American Airlines Center was brought up, I was curious to know what AA is doing to stop the constant promotion of the American Airlines Center as the AAC. This is the standard name being used right now on radio, tv sport programs, mavs and stars announcers, concerts, and other things. Sure, we, the employees of AA know what the AAC stands for but does the public and are we really getting our monies worth with this name change. If they were saying the AA Center, that wouldn't be as bad as the AAC, because the AAC really doesn't promote AA at all. I believe that I have even heard Mark Cuban refer to it as the AAC at different times and he is collecting half the check that American writes each year.

 

[Bob Owens]

FWAAA,Dec 2 2004, 10:08 PM]
Mr Owens, last time I posted that it appeared that your view was "We should have voted no and allowed (caused) AA to file Ch 11," you jumped all over me. I'm too lazy to search for the thread and link it.

But here it looks like your position is "We should have taken our chances in Ch 11."

Let me clarify it for you. We should have rejected the concessions, period. Whether or not they would have filed is speculation. They had a drop dead date that was quickly amended when the F/As rejected the contract.

If I recall I jumped all over you because your statement implied that if we rejected the contract we would have forced AA to go C-11.

If the company had chosen C-11 then so what? We lost more than UAL did anyway. With 60% or so of the industry facing possible liquidation and the unions holding to their guns that abrogation will mean strike I feel the results would have been quite different than they have been. And over the long run airline workers would have been much better off.

And now your solution to the problem of "My employer has too little money" is to call for an industry-wide strike?

"Shut it down"?

Yes, you are a bright guy, and I'm sure that you realize that such an utter collapse of the industry would force the government to do something. When the NYC MTA claims they have no money, they raise fares, they dont go and cut the workers pay by 25%. If the government wants air travel to be just as accessible as a subway train or a city bus then fund it like that, dont expect us to work these crazy hours, weekends and holidays for nothing.

No need to do that. Once USAir and UAL shut down (as they are bound to, once they slash their employees' pay and benefits yet again), the remaining legacy airlines will have a decent shot at survival.

Today, an article mentioned that AA would have been profitable this year were it not for fuel. Good news is that oil prices continued to plunge today.

http://biz.yahoo.com/ap/041202/american_airlines_jobs_3.html

I'm not gonna make any friends here with this next one, but here goes:

It is long past time for USAir and UAL to shut down and go out of business. And the sooner, the better. Their screwing around in BK has done far more harm to your wages and benefits than anything AA did in early 2003. Sometimes you gotta jetison some deadweight to keep the ship afloat (or in the air). And USAir and UAL are dragging everyone down.

Oh, so its not the LCC'S?

When one is being dragged down usually what is dragging you down is lower than you, the fact is we undercut both of those carriers. Our labor costs were and are lower. They did not drag us down, they simply gave the TWU and AA the excuse to push us down.In fact its the opposite of what you claim, our concessions put the final nail in their coffins. So even when they are gone, what did we accomplish? We are stuck with this until 2009. We would need to nearly double our wage just to get back to where we were. While it might be a good deal for a company to engage in predatory pricing so that they can raise fares in the future it doesnt do us a damn bit of good to agree to long term concessions to put someone else out of work. While the TWU may like the idea of more dues payers those people who are not absorbed are now competitors for our jobs and we will not have the flexibility to arbitrarily restore our wages or benifits either.

AA's management isn't currently hurting you (they did that last year). AA's customers aren't hurting you. Not even Southwest or jetBlue or Frontier or AirTran are causing the problem.

Well I'm still working with a paycut, plus they raised my out of pocket costs for medical, so they are treating us no better this year than last. I've always said that the LCC claim was a farce,seems that you have altered from your position there.

UAL and USAir aren't paying their bills, and they are dragging down AA (as well as CO, NW and DL).

So by not going BK AA got to keep the $20 Billion in debt, preserve the value of AA stocks and AA's other creditors kept getting their bills to AA paid even if AAs employees cant pay their bills. Gee that should make us all feel great shouldnt it? We are falling into debt, working second jobs all so people can fly cheap and everyone else can profit off the service that we provide!

Too much fancy-pants airline capacity. Period.

I keep hearing too much capacity, even though the airplanes are flying with historically high load factors. I know, breakeven point, well that goes back to price. Like I said if the airplanes are flying full, they could have charged more. Its like an old Abbott and Costello routine.

 

[FWAAA]

FWAAA,

A little bit off the subject but since the American Airlines Center was brought up, I was curious to know what AA is doing to stop the constant promotion of the American Airlines Center as the AAC. This is the standard name being used right now on radio, tv sport programs, mavs and stars announcers, concerts, and other things. Sure, we, the employees of AA know what the AAC stands for but does the public and are we really getting our monies worth with this name change. If they were saying the AA Center, that wouldn't be as bad as the AAC, because the AAC really doesn't promote AA at all. I believe that I have even heard Mark Cuban refer to it as the AAC at different times and he is collecting half the check that American writes each year.

[post="205616"][/post]​

Excellent question. I don't know how AA can force everyone to say it. And at 8 syllables, it is quite a mouthful. "Staples Center" here in LA (home of Lakers and Clippers) is constantly heard on local newscasts, but it's only half the mouthful.

I would assume that the contract requires that the announcers at the game refer to the facility as "American Airlines Center" if they refer to the building at all and probably requires that the facility and teams "use their best efforts" to get everyone onboard. But we all know how effective "best efforts" obligations are. And if in doubt, ask a former TWA employee what they think of AA's best efforts to convince the unions to fairly integrate the seniority lists.

But in reality, there's no way to get the sportscasters on TV or radio to say the name if they don't want to. Before agreeing to pay $195 million over 30 years, one would hope that the advertising managers are satisfied that the "cost per view" and "cost per listen" is low enough to be worth it. In watching sports on TV, I usually hear the name of the facility plenty of times, be it SBC Park in SFO, Minute Maid Park in HOU, Coors Field in DEN, or Bank One Ballpark in PHX. Those names are repeated over and over if you watch telecasts of games from those parks. But so was Enron Field.

Truth be told, quite a few articles, scholarly and in the popular press the last few years, take the view that stadium naming deals are wastes of money. And they might very well be right. No disputing the fact that many of the companies hit financial hard times not long after signing deals to name arenas. Just like skyscrapers, they probably aren't the best use of the company's money.

On the positive side, A Google search just now shows hundreds of references today to "American Airlines Center" in newspapers all over the country, just like this article discussing last night's Mavs victory:

In a Lone Star duel between two of Texas' brightest stars, Nowitzki's brilliance was blinding. The All-Star forward lit up the night with a franchise-record 53 points to shoot the Mavericks past Houston 113-106 in overtime Thursday night at American Airlines Center.

http://www.sunherald.com/mld/sunherald/sports/10327367.htm

Third paragraph of a 20-some paragraph story about the game. Not terrible placement, if you ask me. Better than being in the last paragraph of the story.

Although reasonable people can argue about whether advertising makes sense at all, the name "American Airlines Center" appears daily in sports pages all over the country. In a sense, AA gets a mention in nearly every daily paper every day. Don't know if it works to increase revenue, but I doubt it hurts. Add in the Miami Heat stories, and I'm sure a reasonable argument can be made that the $8.6 million is a fair price for the views and listens. And reasonable arguments can certainly be made to the contrary. Tastes great - Less filling if you ask me.

(I've never been a big believer in ads - I like to think I'm smart enough to choose products based on something more objective than advertising, but I'm probably wrong about myself.) If advertising really doesn't work, then it would be fair to ask why so many highly profitable companies do so much of it (Budweiser, Miller, Coke, Pepsi, GE, Wal-Mart, Target, etc)

As I've said many times before in response to Mr Owens' complaints about AA's advertising and promotion expenses, AA is really very frugal and has been for several years. To compare, Southwest has historically spent much more for advertising than AA, when measured per dollar of revenue.

Last year, Southwest spent more on advertising than AMR, despite having only about one-third the revenue. WN doesn't have a stadium deal, but it is the official airline of many MLB teams and in past years has been the official airline of the NFL (and probably other sports, too). As to baseball, WN advertises extensively on TV and radio, as well as at the games. I'm a fan of the Dodgers and Cubs, and their broadcasts feature tons of ads for WN on TV and radio. But WN never gets a mention in the sports pages the way AA does because of the Dallas and Miami arenas. Who knows which is a better arrangement?

Here's an up to date list of naming rights deals:

http://www.espn.go.com/sportsbusiness/s/stadiumnames.html

Several of the names on this list have changed in the past 3 years or so as BK hit the advertisers.