Why Don't The Airlines Just Raise Fares?

[mweiss]

Maybe the hand waving is because you claim to have proven things without specifics.

Except that it's not. You're in over your head, and I'm not sure if it's because you can't think in the abstract or if it's something else.

Ahh, Rod Sterling Lives!!!

You mean you can't think in shades of gray either? Don't you think that someone who wants to leave at 9AM would have somewhat less preference for 8AM or 10AM, and even less preference for 2AM or 3PM? Don't you think that someone who wants to leave from DCA would have somewhat less preference for IAD or BWI? Are you really too dense to understand this?

Because fooling the leadership isnt enough, you have to fool the membership also.

If your understanding of accounting and finance is representative of your peers, I can see how it would be easy to fool the membership.

[Upper management bounces around] As often as I've seen.

You only hear about it when they do.

Means to an end.

Oh, get off it already. You have a conspiracy theory with vapor to back it up. The one fact I have that you have yet to disprove (in fact, you've supported it) is that they don't have to fabricate losses. You see, you and your peers couldn't tell the difference!

JFK to anywhere. Theres a start.

Fair enough. I should have said "LCC" instead of "WN."

Then again the losses on any particular route are not as great when viewed as a proportion either.

Actually, not true. They're roughly the same, proportionally speaking.

And you know this for sure?

For sure? Nope. However, compare the financial statements of B6 and FL against, say, WP or N7 at about the same points in their history. B6 and FL are in much better shape. And F9 has already made it through the era that killed NJ and N7. How many other LCCs survived an era of LCC attrition intact? I can think of only one.

While more LCCs may survive, will they remain LCCs?

Depends on your definition. My guess is that the future of the industry will look more like the current LCCs than the legacies. The big unanswered question is whether differentiation successfully breaks out, or whether the industry will be reduced to a true commodity. I'm betting on the former.

 

[mweiss]

Do you mean operating profit/loss or operating profit/loss*? You know the one that includes things that it shouldnt with a little note on the bottom of the page.

I'm including the things necessary for day to day operations, i.e., EBITDA.

Well I disagree. You still have not convinced me that Jet Blue, with their 60 airplanes and limited capacity can dictate the price of airfares to AA with over 700 airplanes when load factors for the industry are in the 70 percent or better range.

Of course I haven't. I haven't started to explain it, because it requires that you understand and accept the pricing explanations that I've already covered.

Like USAIR right?

In a sense, yes, though US hasn't quite hit the ground yet.

Oh and when is an airline now considered to be broke?

When loan covenants can no longer be met.

In 2003 we were told that it was $1 billion in cash, now we are told the figure is $2billion.

Do you understand what loan covenants are?

Care to elaborate on that?

Sure. EBITDA is affected by how much you make from putting butts in the seats. If you maximize profit, you're pricing based on the shapes of your own supply and demand curves. Changing your prices will change your yields, which will change your RASM, which will change your EBITDA. If you are already at your maximum, then any change in your prices will reduce yields, which will reduce RASM, which will reduce EBITDA.

 

[FWAAA]

Once again those rules are written to give the investor transparancy towards things that could make his investment worth less. While I acknowledge that revealing them is the law are you saying that they had to write it all off in 2003 thus bringing its claimed loss up to $3.5 billion?? Are you saying that they could not have written down those liabilities over time?

Ok, go on to show where I am wrong. Dont bother with "these are legal write offs", we already covered that. When the company claims that they "lost" $3.5 billion but a lot of those "losses" were not real in that the company did not really pay out $3.5 billion more than what it took in it is misleading to the workers. And if the workers knew that the"losses" were really mostly made up of legal loopholes that were put in place to reduce the airlines tax burden and not in fact real cash losses where income is compared to operating expenses then their veiw of what position the company was really in would be considerably different. The fact is that our union stated that AA was at risk of immediate liquidation, that was a lie.

[post="249909"][/post]​

We've been over the goodwill writeoff several times before, but here it is one more time. SFAS 142 required an immediate writeoff of the impaired goodwill. See http://www.fasb.org/st/summary/stsum142.shtml for the executive summary of SFAS 142.

As AMR said in its 2002 10-K:

Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). SFAS 142 requires the Company to test goodwill and indefinite-lived intangible assets (for AMR, route acquisition costs) for impairment rather than amortize them. During the first quarter of 2002, the Company completed its impairment analysis for route acquisition costs in accordance with SFAS 142. The analysis did not result in an impairment charge. During the third quarter of 2002, the Company completed its impairment analysis related to its $1.4 billion of goodwill and determined the Company's entire goodwill balance was impaired. In arriving at this conclusion, the Company's net book value was determined to be in excess of the Company's fair value at January 1, 2002, using AMR as the reporting unit for purposes of the fair value determination. The Company determined its fair value as of January 1, 2002, using various valuation methods, ultimately using market capitalization as the primary indicator of fair value. As a result, the Company recorded a one-time, non-cash charge, effective January 1, 2002, of $988 million ($6.35 per share, net of a tax benefit of $363 million) to write-off all of AMR's goodwill. The tax benefit of $363 million differed from the amount computed at the statutory federal income tax rate due to a portion of AMR's goodwill not being deductible for federal tax purposes. The charge to write-off all of AMR's goodwill is nonoperational in nature and is reflected as a cumulative effect of accounting change in the consolidated statements of operations.

You claim that AA's $3.5 billion loss was "misleading to the workers." You don't give your co-workers much credit, do you?

So your union lied to you by claiming that liquidation was around the corner if you didn't approve the concessions? So what? Sue your union for fraud, if you want.

Yes, I know. Had the workers not been "mislead," they would have rejected the concessions.

I've got news for you. I wouldn't be surprised if the concession vote failed. Really. But rather than watch a Ch 11 filing, your union leaders probably fibbed and told AA that they were approved. That gave each mechanic one last chance to accept or reject the concessions without Ch 11. And except for some retirements and resignations that you have detailed lately, many mechanics accepted the concessions. And continue to do so every day.

Not just at AA; mechanics at UAL and USAir have accepted massive pay cuts. Of course, UAL simply eliminated all heavy overhaul. Only WN mechanics have avoided concession demands thus far.

The reality is that AMR's negative cash flow in 2002 from operations was about $1.1 billion. Investing activities (primarily cap expenditures) totaled another $1.4 billion. $2.5 billion in negative cash flow. AMR covered that by borrowing $3.2 billion in 2002 and had to pay about $700 million on debt, for net new borrowings of $2.5 billion. Same as the negative cash flow. Complain all you want about the size of AMR's 2002 loss; it doesn't change anything. AMR was near default on its debt (loan covenants required $1.0 billion in unrestricted cash to avoid default) and could borrow no more.

Up against $2.5 billion in negative cash flow (that's $2.5 billion more out than in) in 2002 and lenders saying "no more until you really cut costs," AA did what it had to do: It slashed wages and benefits of its represented employees by $1.6 billion. Wage cuts are awful. And thousands were furloughed. But thousands of laid off (forever) UAL overhaul mechanics would argue that wage cuts are preferable to the alternative. That you keep showing up for work is evidence you agree, notwithstanding your protests to the contrary.

 

[Bob Owens]

mweiss,Feb 23 2005, 06:06 AM]
Except that it's not. You're in over your head, and I'm not sure if it's because you can't think in the abstract or if it's something else.

You mean you can't think in shades of gray either? Don't you think that someone who wants to leave at 9AM would have somewhat less preference for 8AM or 10AM, and even less preference for 2AM or 3PM? Don't you think that someone who wants to leave from DCA would have somewhat less preference for IAD or BWI? Are you really too dense to understand this?

I see that when you cant make an arguement out of facts you then resort to personal insults. I believe that several posts back I said that there are so many variables(shades of grey if you like) that its very difficult to pinpoint anything when it comes to how customers will react. This just further illustrates the limited ability of your formulae and that in the end trial and error is still very much a part of doing business.

If your understanding of accounting and finance is representative of your peers, I can see how it would be easy to fool the membership.

More insults, still no substance I see.

You only hear about it when they do.

Which is pretty often when compared to the workers.

Oh, get off it already. You have a conspiracy theory with vapor to back it up. The one fact I have that you have yet to disprove (in fact, you've supported it) is that they don't have to fabricate losses. You see, you and your peers couldn't tell the difference!

No they dont have to fabricate them, but they most certainly used them to their advantage. Back when we were looking at the 10K you said that the writedown for Goodwill was not a part of operating expenses yet AMR did include that in the category, along with a notation on the bottom stating that it was included. Why would they do that? What was the purpose of including it there at all?

Actually, not true. They're roughly the same, proportionally speaking.

So you are claiming that if an airline has 100 routes and loses money on 2 of them that its the same as if they fly over 3000 routes and loses money on 2 of them?

Depends on your definition.

Well what is your definition? SWA is often quoted as "the" LCC yet they pay higher wages, so labor cost wise they pay more per manhour than all the "high cost" legacies. However they operate out of secondary airports where landing fees, rents etc are lower and they operate a singular fleet type. THeir efficient scheduling and lower non-labor operating costs has made them a profitable corporation but the service they offer is limited. Do you really see business travelers going from coast to coast trying to work on their laptops with some 300 lb guy on one side and a mother with a screaming baby on the other?

My guess is that the future of the industry will look more like the current LCCs than the legacies. The big unanswered question is whether differentiation successfully breaks out, or whether the industry will be reduced to a true commodity. I'm betting on the former.

And I gues that all the high end stores are going to dissapear and everyone will buy everything at WalMart too? But then again if WalMart pays more, like SWA does, why fight it? Why take concessions to save a dying business plan?

 

[Bob Owens]

mweiss,Feb 23 2005, 06:20 AM]
Of course I haven't. I haven't started to explain it, because it requires that you understand and accept the pricing explanations that I've already covered.

Well like I stated before, state your case.You keep claiming that you have proved things but you havent, you have only spoken in the abstract without furnishing specifics.

In a sense, yes, though US hasn't quite hit the ground yet.

No. they have only been in BK for three years.

When loan covenants can no longer be met.

And then what? They call back the loan, the company files BK.

Do you understand what loan covenants are?

Sure, the terms of the loan. In this case as a condition of the loan the company must maintain a certain cash balance.

More than likely they use reducing their exposure to risk as the excuse for such a covenant. And it makes sense, however in this case it also serves another purpose, it allows the company to use the threat of BK to extort concessions from their workers while the company still has huge cash reserves on hand. No matter how you slice it, $1 billion is a lot of cash. Maybe not enough to whether a strike, but its still a lot of money.

So the banks set onerous terms. The question is are we, as employees, better off insuring that those rediculous covenants are met by modifying our own covenants and accepting huge paycuts or let the company seek protection in BK?

Before the banks demanded $1 billion in cash, we gave up 25% of our pay, now they want $2 billion in cash. If we went BK then those covenants could be thrown out. Would AA have trouble getting cash? Probably, but USAIR has been doing it for three years and UAL for two, both are still operating and AA was in better shape going into this recessions than either of them.

I remember the company bragging about having a $500 million war chest, now thats chump change compared to what the banks are requiring and I have to wonder if the airlines welcomed such a covenant so they could blame the banks for demanding more concessions from the workers.

When we lost 25% of our pay the company claimed that it amounted to a $310 million savings for the company from maintenance. Now the company is demanding another $500 million. I suppose that now the $2 billion required to satisfy the covenant will be the new threat, but the real fact is that the company now has an extra billion compared to 2003 yet they will be threatening to go bankrupt unless we give then what would amount to an addtional 40% cut on top of what we already gave. And why wouldnt they? It worked so well last time, why wouldnt they go for more?

You claim that I am a conspiracy nut, well thats not true, but conspiracies do exist and I do believe that some in this industry have conspired, along with the banks, to take advantage of the events of Sept 11 and the Bush recession to "reset the bar" in Labor Costs as the CEO of NWA stated recently.

Sure. EBITDA is affected by how much you make from putting butts in the seats. If you maximize profit, you're pricing based on the shapes of your own supply and demand curves. Changing your prices will change your yields, which will change your RASM, which will change your EBITDA. If you are already at your maximum, then any change in your prices will reduce yields, which will reduce RASM, which will reduce EBITDA.

And you have yet to prove that tickets prices are at their maximum.

 

[Bob Owens]

FWAAA,Feb 23 2005, 08:39 AM]
We've been over the goodwill writeoff several times before, but here it is one more time. SFAS 142 required an immediate writeoff of the impaired goodwill. See http://www.fasb.org/st/summary/stsum142.shtml for the executive summary of SFAS 142.

You claim that AA's $3.5 billion loss was "misleading to the workers." You don't give your co-workers much credit, do you?

The fact is that operating losses were $2.5 billion, not $3.5 billion. Most workers are not going to try and sift through a 10K to find this out and they should not have to.

So you can exclude $1 billion already. How much of the remaining $2.5 billion in losses were due to accellerated depreciation, pre paid leases and other accounting tactics?

I've got news for you. I wouldn't be surprised if the concession vote failed. Really. But rather than watch a Ch 11 filing, your union leaders probably fibbed and told AA that they were approved. That gave each mechanic one last chance to accept or reject the concessions without Ch 11.

What are you babbling about?

And except for some retirements and resignations that you have detailed lately, many mechanics accepted the concessions. And continue to do so every day.

Accept? "Like accepting a beating".

Not just at AA; mechanics at UAL and USAir have accepted massive pay cuts. Of course, UAL simply eliminated all heavy overhaul.

Not true. They still do some heavy overhaul.

Only WN mechanics have avoided concession demands thus far.

Wrong again. NWA, Continental, UPS, Fed Ex etc have not accepted concessions either.

The reality is that AMR's negative cash flow in 2002 from operations was about $1.1 billion.

So in other words from direct business activities, that is moving people from one point to another AMR lost $1.1 billion. And during 2002 AMR continued hiring new hires off the street while paying unemployment benifits for thousands of laid off TWA-LLC workers. There was no campain to cut fuel consumption, here at JFK they embarked on new projects such as painting the hangar doors(over $1 million), putting a new roof on the hangar, paving the parking lot and all sorts of deferrable capital improvement projects. Like I said from the floor it seemed like the company was on a cash burn.

Investing activities (primarily cap expenditures) totaled another $1.4 billion. $2.5 billion in negative cash flow.

Ok, explain what these investing activities were.

AMR covered that by borrowing $3.2 billion in 2002 and had to pay about $700 million on debt, for net new borrowings of $2.5 billion. Same as the negative cash flow. Complain all you want about the size of AMR's 2002 loss; it doesn't change anything. AMR was near default on its debt (loan covenants required $1.0 billion in unrestricted cash to avoid default) and could borrow no more.

So in reality they only near defaulting on one of the covenants of the loan, that is the requirement that they keep $1 billion on hand, not near being unable to make payments on the loan right?

Up against $2.5 billion in negative cash flow (that's $2.5 billion more out than in) in 2002 and lenders saying "no more until you really cut costs," AA did what it had to do: It slashed wages and benefits of its represented employees by $1.6 billion. Wage cuts are awful.

Yes and we saw how awful is was for all the exucutives who funded golden parachutes for themselves. You are so full of crap, I have no doubt that once they got the news that champagne corks were flying all over the place. The banks keep getting their money, the lessors keep getting their money. The airports keep getting their money, the only ones who get hurt are the workers.

And thousands were furloughed. But thousands of laid off (forever) UAL overhaul mechanics would argue that wage cuts are preferable to the alternative.

Thousands? Find me 10..

That you keep showing up for work is evidence you agree, notwithstanding your protests to the contrary.

Wrong, I show up in order to fight. I voted no, as did over 90% of the other mechanics in my Local. I would have rather had a layoff than take a paycut. I would collect unemployment till I found somnething else then came back to full pay later on recall.

 

[mweiss]

I see that when you cant make an arguement out of facts you then resort to personal insults.

No. When I get frustrated at obtuseness, I tend toward personal insults. But don't let the facts get in the way of yours.

I believe that several posts back I said that there are so many variables(shades of grey if you like) that its very difficult to pinpoint anything when it comes to how customers will react.

You did. That's why you determine the demand curve experimentally. It incorporates all variables inherently, without requiring that you understand why they even exist. It's really quite an effective strategy.

This just further illustrates the limited ability of your formulae and that in the end trial and error is still very much a part of doing business.

Of course. But you don't do it blindly; you collect a lot of historical data so that you don't end up with every day being Groundhog Day.

More insults, still no substance I see.

Not at all. You proved to all of us that you don't understand accounting. Furthermore, you suggested that your leadership doesn't understand it, either. Then you go on to express incredulity at the idea that maybe, just maybe, it's this lack of understanding that results in a willingness to offer concessions. Instead, you hang on to the belief that operating losses were produced by underpricing. I've already shown you how it wasn't necessary to do, because you and your peers cannot tell the difference. Why go to the trouble of actually losing money to prove the point, when you only have to convince the union employees that you did? :huh: It's a lot less expensive if you don't really lose the money.

Which is pretty often when compared to the workers.

Of course it is. You have seniority; they don't. In the rest of the employment universe (yes, even among those "little people"), people move around a lot these days. It's just not terribly interesting to fill the Wall Street Journal with every person who changes jobs.

No they dont have to fabricate them, but they most certainly used them to their advantage.

Bringing us right back to square one. Do the airlines deliberately reduce fares in order to get concessions? Not likely, because they don't have to; they get the concessions anyway.

So you are claiming that if an airline has 100 routes and loses money on 2 of them that its the same as if they fly over 3000 routes and loses money on 2 of them?

No. I'm claiming that once you're already a full-coverage airline, growth at a hub-based airline comes more in the form of increased frequency or larger aircraft, not more routes. In such a situation, losses show up roughly proportionally. There are some mitigating opportunities, but they're small relative to the numbers we're talking about.

Well what is your definition [of an LCC]?

Truth be told, it doesn't matter what my definition is. You asked if the LCCs will remain LCCs. Since I don't know what you meant by LCC in that question, I didn't really know how to answer.

Nonetheless, I'll take a couple of stabs at it.

Will they retain the fundamental structures that have worked so well (e.g., extremely simplified fleet, short turns, simplified fare structure, high productivity per worker)? Absolutely; there's no reason not to.

Will they maintain the lowest unit costs in the industry? That one is harder to answer, because it depends on a slew of unknowns. My guess is that the current batch will have costs that creep up slowly, and a new batch of airlines could move in and undercut them as a result. It's only a guess, though.

Do you really see business travelers going from coast to coast trying to work on their laptops with some 300 lb guy on one side and a mother with a screaming baby on the other?

I don't literally see it, because I have avoided WN. However, I've flown on legacies plenty of times where I've seen business travelers sitting in 31" pitch with some 300 lb guy on one side and a mother with a screaming baby on the other. I'm sure they'd be happy to have the 34" pitch on B6 during that flight.

And I gues that all the high end stores are going to dissapear and everyone will buy everything at WalMart too?

[post="250133"][/post]​

No. And this is why I think (hope) that differentiation will show up in the airline industry as well. The problem is that the people running the show at the legacies have yet to comprehend the value of differentiation, and producing a product that is worth more, at a price that their customers agrees is fair for the higher level offering.

 

[mweiss]

Well like I stated before, state your case.You keep claiming that you have proved things but you havent, you have only spoken in the abstract without furnishing specifics.

Well, now, I can't go any further in stating my case until you have accepted the elements that I have presented to date. The rest builds on that which comes before.

I claim that the supply curve is easily determined by the airline for any flight. Do you agree that this is true? If not, why not?

I claim that the demand curve can be experimentally determined by the airline for a given city pair and time served by the airline. Do you agree that this is true? If not, why not?

I claim that, provided you know the supply curve and demand curve, you can determine an optimal price in a single-price model. Do you agree that this is true? If not, why not?

I claim that, provided you know the supply curve and demand curve, and you are able to differentiate among the characteristics of different passengers, you can determine a series of optimal prices in a multi-price model. Do you agree that this is true? If not, why not?

No. they have only been in BK for three years.

Um, no, they haven't. Not cumulatively, and certainly not consecutively. They're on the edge.

And then what? They call back the loan, the company files BK.

Yes, that's exactly what happens. AA has some pretty good reasons for not going there. Do you want AA to file for bankruptcy?

More than likely they use reducing their exposure to risk as the excuse for such a covenant.

An excuse??? :blink: It's the whole point! If the covenant weren't in place, the lender would charge a higher interest rate to cover the additional risk. Saying that risk reduction is an excuse for a covenant is like saying buying a house is an excuse for getting a mortgage.

however in this case it also serves another purpose, it allows the company to use the threat of BK to extort concessions from their workers while the company still has huge cash reserves on hand.

I'm sure that was the main goal in restricting the cash. Lower interest rates never crossed their minds.

No matter how you slice it, $1 billion is a lot of cash. Maybe not enough to whether a strike, but its still a lot of money.

Not enough to weather a strike? They cannot touch it. It may as well not exist for the purposes of daily operations. It doesn't matter how much money it is, they cannot touch it. I don't care if it were a trillion dollars; if the covenants say they can't touch it, they cannot touch it.

AMR has twelve billion dollars in long-term debt. You think $1B is a lot of money? Try $12B. In other words, the covenant-required reserve, while large in human terms, is tiny relative to the debt.

So the banks set onerous terms. The question is are we, as employees, better off insuring that those rediculous covenants are met by modifying our own covenants and accepting huge paycuts or let the company seek protection in BK?

That's a question, but it's not the question of this thread. The question is whether or not the company is artificially losing money by undercharging customers.

The rest of the discussion, while interesting, doesn't belong here. This thread is long enough without bringing labor negotiations and the non-operating elements of finance into the discussion.

 

[FWAAA]

The fact is that operating losses were $2.5 billion, not $3.5 billion. Most workers are not going to try and sift through a 10K to find this out and they should not have to.

I didn't say "operating losses. I said "negative cash flow," which means, $2.5 billion more cash went out the door than came in.

I didn't have to sift thru the 10-K very long to find the Statement of Cash Flows. AA's problem in early 2003 was not its GAAP losses, despite what your union told you. The problem was a shortage of cash.

So you can exclude $1 billion already. How much of the remaining $2.5 billion in losses were due to accellerated depreciation, pre paid leases and other accounting tactics?

Like I said above, none. The $2.5 billion was the cash burn for 2002.

What are you babbling about?

Decision2004 and others have repeatedly posted their suspicion that the TWU tampered with the vote. I agree. The TWU may have reported acceptance when rejection might have been the honest answer.

Not true. They still do some heavy overhaul.

My bad. Everything I've read or heard is that the closure of IND and OAK meant the end of heavy overhaul.

"UAL Corp. said Monday it intends to shift all heavy jetliner maintenance to outsources, a policy it says will halve its maintenance costs."

http://www.bizjournals.com/pacific/stories...05/daily20.html

Wrong again. NWA, Continental, UPS, Fed Ex etc have not accepted concessions either.

Read again. You misunderstood the sentence:

"Only WN mechanics have avoided concession demands thus far."

NW and CO have faced concession demands. They may not have accepted them yet, but they will. Who cares about UPS or FedEx? They are profitable and usually don't carry SLF. I was talking about major pax airlines.

So in other words from direct business activities, that is moving people from one point to another AMR lost $1.1 billion. And during 2002 AMR continued hiring new hires off the street while paying unemployment benifits for thousands of laid off TWA-LLC workers. There was no campain to cut fuel consumption, here at JFK they embarked on new projects such as painting the hangar doors(over $1 million), putting a new roof on the hangar, paving the parking lot and all sorts of deferrable capital improvement projects. Like I said from the floor it seemed like the company was on a cash burn.

Capital improvements aren't included in the $1.1 billion negative cash flow from operations.

Ok, explain what these investing activities were.

Like I posted before, they are primarily Capital Expenditures. You know what they are: Terminal construction, airplane purchase, new roofs, paved parking lots, etc. All the things that don't fit in Operating Expenses.

So in reality they only near defaulting on one of the covenants of the loan, that is the requirement that they keep $1 billion on hand, not near being unable to make payments on the loan right?

Last time I assisted in an involuntary Ch 11 filing, it didn't matter how many loan covenants the debtor had broken. Result was the same. Trustee appointed. Huge lawyer bills.

Yes and we saw how awful is was for all the exucutives who funded golden parachutes for themselves. You are so full of crap, I have no doubt that once they got the news that champagne corks were flying all over the place. The banks keep getting their money, the lessors keep getting their money. The airports keep getting their money, the only ones who get hurt are the workers.

For all I know, Carty and his cronies were drinking champagne. I wasn't there. Who cares what the executives were doing? It's not like they cared what you were doing.

Wrong, I show up in order to fight. I voted no, as did over 90% of the other mechanics in my Local. I would have rather had a layoff than take a paycut. I would collect unemployment till I found somnething else then came back to full pay later on recall.

You show up each day to fight? I mistakenly thought it was so you could fix airplanes.

Fight what? Fight the man, that's keepin' you down?

[post="250171"][/post]​

 

[seed]

Michael, I , for one, do not hold a good grasp of accounting. I am, or was, an AMT, not an accountant or in a position, for hire, that would require that knowledge. I attempt to place a "good faith" support behind my union and my company. If either "uses" my good faith to obtain their desired objective in a "covert" manner then either will lose my support and most importantly, my trust.

I do not come to work each day because I accept the concessions. I come to work each day to continue feeding and clothing my family. Slavery was not accepted by those enslaved, it was tolerated until other avenues came to their disposal.

 

[mweiss]

seed,

I realize that you, and most of your peers, don't hold a good grasp of accounting. As I said earlier in this thread, your representatives should. Either they don't, or they are misrepresenting the truth to the membership. Either way, the results are the same.

Ultimately, though, it supports one of the points I've been trying to make. AA isn't losing money on purpose by selling tickets at below market. They don't have to, if the goal is to extract concessions.

Of course, the other point I'm trying to make, and hope I'll eventually be able to address, is that the growth of LCCs, coupled with a reduction in business travel demand (caused by a combination of the dot-com bubble bursting, change in business behavior regarding travel, and greater pricing transparency) has reduced the pricing power that legacy carriers used to have.

 

[767 mechanic]

Michael, I , for one, do not hold a good grasp of accounting. I am, or was, an AMT, not an accountant or in a position, for hire, that would require that knowledge. I attempt to place a "good faith" support behind my union and my company. If either "uses" my good faith to obtain their desired objective in a "covert" manner then either will lose my support and most importantly, my trust.

I do not come to work each day because I accept the concessions. I come to work each day to continue feeding and clothing my family. Slavery was not accepted by those enslaved, it was tolerated until other avenues came to their disposal.

[post="250317"][/post]​

This is starting to get a little wierd Seed we seem to be seeing eye to eye on a couple of subjects tonight. I agree with you totally it is time that we as mechanic and related stop being enslaved by the twu and make a change.

 

[Bob Owens]

mweiss,Feb 23 2005, 03:56 PM]
Of course it is. You have seniority; they don't. In the rest of the employment universe (yes, even among those "little people"), people move around a lot these days. It's just not terribly interesting to fill the Wall Street Journal with every person who changes jobs.

Seniority is as much of a curse as it is a virtue, most people dont work odd shifts, holidays and weekends out in all sorts of weather. Thats why seniority is something that airline workers, especially mechanics, value so highly. The idea of being out in the freezing cold all night where your extremities are in constant pain from frostbite because in order to do your work you cant bundle up gets less and less appealing as you get older.

Bringing us right back to square one. Do the airlines deliberately reduce fares in order to get concessions? Not likely, because they don't have to; they get the concessions anyway.


Sure they do. The fact is that if Jet Blue has the capacity to fly 200 people to LAX from JFK but on avergage 1000 people a day need to go there then Jet Blue can take their 200 at $69 dollars and AA can charge the other 800 what they want. The fact is that despite your theories, which leave out the ability of the competition to satify the demand, Jet Blue with their 60 airplanes can not dictate to AA with their 700 airplanes what the price of tickets will be.


Truth be told, it doesn't matter what my definition is.

Sure it does, thats why I asked.

 

[Bob Owens]

mweiss,Feb 23 2005, 04:30 PM]
Well, now, I can't go any further in stating my case until you have accepted the elements that I have presented to date. The rest builds on that which comes before.

Thats rediculous. In other words you will not move on unless its by your rules. State your case without going to the basics, we can always work our way back as far as we need to.

Yes, that's exactly what happens. AA has some pretty good reasons for not going there. Do you want AA to file for bankruptcy?

Given the choice of allowing other creditors to keep their contracts intact at the expense of mine yes, let them go into BK. Lets join the ranks of UAL and USAIR because we are ending up the same anyway. Prior to 2003 the company only needed $1 billion in cash now they need $2 billion, in order to satisfy that covenant they are going after another $500,000,000 in cuts from us. The $310,000,000 million they took last time reduced my compensation by 25%. We had 16000 mechanics then, now we only have around 10,000 mechanics. In order for us to meet that goal it would mean that we would have to give up another 40 to 50% of our pay. At that point I'd be better off on unemployment than working and I truly would rather see the company close their doors permanently than accept those terms.

The fact is that with all these people traveling and spending, money is being made. If the airlines can not make money doing it then shut them down. Why wait, lets do it right away and lets see what happens when everyone who wants to fly has to jam onto Jet Blues 60 airplanes, and wherever Jet Blue doesnt fly, well let everyone just stay home.

Let GE park their 1000 airplanes in the desert. Let the airports survive off Jet Blues landing fees and rents. Let Exxon turn their Jet Fuel into heating oil and Gas. Let the hotels close down.

The fact is that despite your claims airline workers and their pay has been set within the sights of the industry and the government. In the spring of 2001 I attended an IRRA conference in Washington DC where several government and industry spokespersons all said the same thing about bringing down airline workers wages.

Herman Bonilla represented the Bush administration and he said that the government felt that cheap air travel was essential, and so were profitable airlines and that the system could not meet the needs of providing profits for shareholders along with cheap fares if wages were high.

Sue Oliver (at the time the head of AAs HR dept)went on and on about the "unrealistic expectations of airline workers" in regard to pay.

Have you ever read HR1327? It specifically dictated that wages would be contolled by two things, the profitability of the carrier and the wages of other airline workers. So in other words the most unprofitable carrier would set the wages for the entire industry.

Now you come here and claim that there is no conspiracy, well perhaps its because you have not seen what I've seen over the last twenty five years.

I'm sure that was the main goal in restricting the cash. Lower interest rates never crossed their minds.

Its still an onerous term. I didnt say that was the only reason, the fact is that other options may have been available in this and many other cases but the choices made offered a side benifit. Should we as workers be willing to earn less so the company can pay a lower interest rate?Do you really think that if we went below that figure that the bank would demand all their money back knowing that we would go into BK or would they simply renegotiate the deal at a higher interest rate? The fact is we dont know do we but we do know that despite all the BS that USAIR and UAL are both still flying.


AMR has twelve billion dollars in long-term debt. You think $1B is a lot of money? Try $12B. In other words, the covenant-required reserve, while large in human terms, is tiny relative to the debt.

Big deal, and they have around $18 billion/year in revenue and $30 billion in assetts. So thier total debt is lower than one year of revenue. Compare that to the average person who takes out a mortgage that is three times his annual earnings. Corporations have the added benifit in that they are immortal.

That's a question, but it's not the question of this thread. The question is whether or not the company is artificially losing money by undercharging customers.

All of a sudden you want to stay on topic?

 

[Bob Owens]

mweiss,Feb 23 2005, 09:03 PM]
seed,


Ultimately, though, it supports one of the points I've been trying to make. AA isn't losing money on purpose by selling tickets at below market. They don't have to, if the goal is to extract concessions.

Sure they do, because in order to win the concessions they have to show that the problems are caused by things that are out of their control, blaming it on the need to match competitors is the perfect way to do it. It's worked so well in the past too.

By blaming it on competition they also get to foster the "We are in this fight together" crap. You know "Pull together , win together". If they just said "Hey, we are cutting you pay because we can" it would be a sure cause for worker revolt. They have to hide behind some boogeyman, that boogeyman is the "competition.
Proof of that is because that is exactly what they did in 1994. They claimed they were on the verge of extinction and the needed concessions, within a year they were making record profits while in the meantime our standard of living was declining. Resentment built up slowly and the company refused to reopen the six year contract and simply said "Blame your union". The fact is they screwed us, they misrepresented the truth and they got away with it. There is no reason to think that they didnt do it this time too.