Why Not Restore and More?

[Bob Owens]

Here is another way to look at the revenue numbers.

In 2003 each employee generated $173,000 in revenue, in 2008* the figure is $280,070, an increase of over $100,000.

They can afford "Restore and More". maybe they will not be able to pay down their debt as fast, buy all them new airplanes right away and put off winglets for a while but hey we all have to make sacrifices right?

*assuming total revenue for the year is $24billion.

 

[eolesen]

If you're mixing up net debt with total debt, then FWAAA is correct --- you're going to be off by a factor of the billions in unrestricted cash which get included as an offset in one figure and not the other. I mix them up all the time. Being your own accountant is like being your own lawyer -- not wise if you don't have the degree to go along with the task...

Also keep in mind the spin in Flagship News is going to use whichever figure suits the message they're trying to send that week.

I don't see anybody discrediting you personally, Bob. I'm posting facts and reports which show that revenues are heading in the toilet. FWAAA is pointing out some flaws in your debt argument which you probably didn't know were there.

Try spending a little less time being offended and maybe a little more time listening to why the numerators and denominators don't line up the way you want them to.

 

[Bob Owens]

If you're mixing up net debt with total debt, then FWAAA is correct --- you're going to be off by a factor of the billions in unrestricted cash which get included as an offset in one figure and not the other. I mix them up all the time. Being your own accountant is like being your own lawyer -- not wise if you don't have the degree to go along with the task...

If you want to dispute the 20 to 10 billion fine, the other figures are from the Flagship news under the heading of "Just the Facts".

Also keep in mind the spin in Flagship News is going to use whichever figure suits the message they're trying to send that week.

That was taken into account, thats why I just used the numbers that would be more difficult for them to lie about.

I don't see anybody discrediting you personally, Bob. I'm posting facts and reports which show that revenues are heading in the toilet. FWAAA is pointing out some flaws in your debt argument which you probably didn't know were there.

Since when are projections "facts"?

Try spending a little less time being offended and maybe a little more time listening to why the numerators and denominators don't line up the way you want them to.

Well the numbers do line up, I picked revenue vs the number of employees, and the numbers indicate that revenue increased dramatically while the number of employees decreased dramatically, something that you rarely see. Thats a huge productivity increase, and productivity increases warrant wage increases. Normally companies that are cutting heads see a reduction in revenue as well, they just hope that the benifit of cost savings outweighs the loss of revenue, AMR saw increased revenue with reduced headcount, they hit a grand slam.

 

[eolesen]

You know what, you're halfway to the productivity figure.

Just change "revenue" to "profit" and you're there.

Showing revenue per employee is about as useful as comparing employees per aircraft when comparing maintenance expense for AA and UA.

 

[Bob Owens]

You know what, you're halfway to the productivity figure.

Just change "revenue" to "profit" and you're there.

Revenue is a reliable and fair figure we can use to measure worker productivity. I've never seen profit used to measure productivity, probably because profits are easily manipulated through the use of accounting practices and other decisions that have absolutely nothing to do with the productivity of the workforce. If a company decides to channel revenue towards paying down debt instead of using it to show a profit they can easily do so, that changes the profits but it doesnt change the productivity of the workers. Profitabilty is a measure of managements competance not worker productivity. Poor management could have the most productive workers in the world and still lose money.

 

[eolesen]

Have at it, Bob. I still think you're living in fantasy land as far as your goal of restoration to 2001 plus inflation.

Obama might appear to be serving out Bill Clinton's third term with his Cabinet picks, but economically, it's just as likely to look like Jimmy Carter's second term. We all know how well labor fared back then...

 

[Chuck Schalk]

there is no disputing the facts:

Decreased fixed costs:

Increased Labor productivity since 2003 (above and beyond the concessions) in the millions!

crews have been cut in as much as half

Fuel costs obviously in the hundred of millions since the high of $1.47

reduced employees and benefits

reduced airplanes and fuel




Increased Revenue:

fuel surcharge fee

baggage fee

rebooking fee

higher average fare prices

on board buying of food

employee fee...... N/A


just to name a few.....

How did AA pay down 11 billion in debt in 5 years? Where did that money come from?

wake up and expose the allusion! Look behind what they say and go with facts.

 

[Bob Owens]

Have at it, Bob. I still think you're living in fantasy land as far as your goal of restoration to 2001 plus inflation.

Obama might appear to be serving out Bill Clinton's third term with his Cabinet picks, but economically, it's just as likely to look like Jimmy Carter's second term. We all know how well labor fared back then...

Please tell us, how did Labor fare with Carters second term?

 

[FWAAA]

$16.4 Billion in 3Q05 to $10.7 Billion in 3Q08.

Those are Tom Hortons figures from the Flagship News. $5.7 billion in three years. So in three years they eliminated a third of their debt, not bad. On average nearly $2billion a year.

You're quoting the net debt numbers, which are total debt less unrestricted cash. The steep decline noted by Horton doesn't mean the debt was paid down - an increase in unrestricted cash (from sale of new stock, sale of assets, etc) can cause the net debt figure to decline.

I was incorrect - AMR's total debt at the end of 2005 was, infact, $20.1 billion. I didn't think it hit that high.

That said, AMR has reduced its debt since 2003. How much?

Total debt at the end of 2005 was $20.1 billion and has been reduced to $15.4 billion at the end of the third quarter of this year. That's a reduction of $4.7 billion. Impressive, to be sure. Most of it was required debt repayment and some of it was paid prior to maturity (early payoff).

So during 2006, 2007 and the first nine months of 2008, AMR paid down $4.7 billion, or about $1.6 billion a year. How did AMR do it? Well, AMR has sold about $2 billion in new stock since the concessions and has sold assets like Hotwire, Orbitz and American Beacon. That cash, plus cash generated by flying, has helped AMR build up its cash balance and pay down $4.7 billion of debt.

You want a link to the Flagship News? You could probably find the same figures in the SEC filings for those years if you dont trust my word. The thread was geared towards workers at AA, all they need to do is look at the bottom of Page 2. As for outsiders such as yourself I really dont care if you take me seriously or not. Apparently all this must be at least a little abrasive to the skin on your nose since you've resorted to snide comments. You seem to do that a lot when you cant factually discredit your opponent. You're getting more like Eolsen every day.

As a non-employee, I have no access to Flagship News. Years ago, it was available to the public. And I'm not your opponent. I'd like to see you get more money. I'd also like to see you (and others here) understand the numbers and to avoid mixing and matching different concepts. Perhaps that's an unreasonable expectation.

Revenue is a reliable and fair figure we can use to measure worker productivity. I've never seen profit used to measure productivity, probably because profits are easily manipulated through the use of accounting practices and other decisions that have absolutely nothing to do with the productivity of the workforce. If a company decides to channel revenue towards paying down debt instead of using it to show a profit they can easily do so, that changes the profits but it doesnt change the productivity of the workers. Profitabilty is a measure of managements competance not worker productivity. Poor management could have the most productive workers in the world and still lose money.

About the bolded portion, we've been over this fundamental accounting concept before, but here it is again one more time:

Paying down debt (scheduled or early) doesn't directly affect the profit or loss equation. Just liike borrowing money doesn't directly affect the profit or loss number. However, by pre-paying some higher-interest debt (as AMR has done the last three years), interest expense was reduced. Just like you probably pay down your highest interest debt first, so do companies.

Profits (or loss) are determined by subtracting expenses from revenue. Net borrowings or debt repayments are not included in revenue or expenses. I implore you to learn this concept so that you can discuss finances in a more intelligent manner. Saying things like the bolded portion reveals (to the company and your co-workers) a level of ignorance that is simply astounding considering that you used to serve as the TREASURER of your local. It's difficult to discuss concepts and ideas when you lack an understanding of (and an apparent refusal to learn) the facts.

just to name a few.....

How did AA pay down 11 billion in debt in 5 years? Where did that money come from?

wake up and expose the allusion! Look behind what they say and go with facts.

AA didn't pay down $11 billion in debt. How AMR paid down the $4.7 billion is explained above.

See what I mean, Bob, how the ignorance is a problem? Your faulty numbers, helped along, of course, by Horton's mistake in giving the employees probably more info than many are equipped to digest, has led your former local president down the path of ignorance.

Yes, net debt is down substantially, as is total debt. Well, until the third quarter. In the third quarter financials, AMR disclosed that it borrowed at least $755 million:

Balance Sheet Update

AMR took numerous steps to bolster its liquidity in the third quarter. It raised approximately $300 million through the sale of equity, raised approximately $500 million from aircraft mortgage transactions, closed the sale of American Beacon Advisors for total consideration of $480 million, and drew its $255 million revolving credit facility.

AMR ended the third quarter of 2008 with $5.1 billion in cash and short-term investments, including a restricted balance of $456 million. At the end of the third quarter of 2007 AMR had $5.8 billion in cash and short-term investments, including a restricted balance of $447 million.

AMR's Total Debt, which it defines as the aggregate of its long-term debt, capital lease obligations, the principal amount of airport facility tax-exempt bonds, and the present value of aircraft operating lease obligations, was $15.4 billion at the end of the third quarter of 2008, compared to $16.6 billion at the end of the third quarter of 2007. AMR's Net Debt, which it defines as Total Debt less unrestricted cash and short-term investments, was $10.7 billion at the end of the third quarter of 2008, compared to $11.2 billion at the end of the third quarter of 2007.

http://phx.corporate-ir.net/phoenix.zhtml?...&id=1212522

 

[eolesen]

Please tell us, how did Labor fare with Carters second term?

You're about to find out in January, Bob.... If Obama follows thru on things like a $10 minimum wage and increases in corporate taxes, we'll be right about at the point where Jimmy left things for Reagan: double digit inflation, record unemployment, and flat to negative economic growth.

Nothing Carter did during his term worked out well, aside from Camp David.


To be fair, Carter had ambitions of reforming NRLA along the lines that the EFCA supporters do today. He just couldn't deliver anything he promised to labor during the campaign. Chalk it up to either arrogence or inexperience, just like Obama.

Under Carter, deregulation came to the airlines, trucking, railroads and bus transport. That decline of union labor in trucking and the airlines has been unreversable. New entrants in both industries were largely non-union workforces, which is what brought on B scale wages. You're still paying the price for that. The Teamsters are all but missing from OTR & short-haul trucking, where they were a dominant force up until the late 60's.

Carter may have accepted Labor's help in getting elected, but once in office, he did them no favors.


Again, economically, we're going to live thru Carter's second term. And I suspect labor is going to pay a price for that, despite promises to the contrary.

 

[Bob Owens]

You're about to find out in January, Bob....
Again, economically, we're going to live thru Carter's second term.

Carter only served one term.

Presidents serve four years, he took office in Jan,1977 and left in Jan 1981.

http://wiki.answers.com/Q/How_many_US_Pres...d_only_one_term

http://en.wikipedia.org/wiki/Jimmy_Carter

 

[Bob Owens]

You're quoting the net debt numbers, which are total debt less unrestricted cash. The steep decline noted by Horton doesn't mean the debt was paid down - an increase in unrestricted cash (from sale of new stock, sale of assets, etc) can cause the net debt figure to decline.

I was incorrect - AMR's total debt at the end of 2005 was, infact, $20.1 billion. I didn't think it hit that high.

That said, AMR has reduced its debt since 2003. How much?

Total debt at the end of 2005 was $20.1 billion and has been reduced to $15.4 billion at the end of the third quarter of this year. That's a reduction of $4.7 billion. Impressive, to be sure. Most of it was required debt repayment and some of it was paid prior to maturity (early payoff).

So if someone came to you and said I cant pay you but then you found out they were prepaying their loans you would be fine with that? As a stockholder I might think that prepaying the loans was great but as an employee working under concessions I feel the opposite.

So during 2006, 2007 and the first nine months of 2008, AMR paid down $4.7 billion, or about $1.6 billion a year. How did AMR do it? Well, AMR has sold about $2 billion in new stock since the concessions and has sold assets like Hotwire, Orbitz and American Beacon. That cash, plus cash generated by flying, has helped AMR build up its cash balance and pay down $4.7 billion of debt.

Ok, so with the one set of figures you are going back to 2003 but with the other you are looking at 2006 to present. Mixing and matching? You also left out how much of a cash balance they built up.

As a non-employee, I have no access to Flagship News. Years ago, it was available to the public. And I'm not your opponent. I'd like to see you get more money. I'd also like to see you (and others here) understand the numbers and to avoid mixing and matching different concepts. Perhaps that's an unreasonable expectation.

Paying down debt (scheduled or early) doesn't directly affect the profit or loss equation. Just liike borrowing money doesn't directly affect the profit or loss number. However, by pre-paying some higher-interest debt (as AMR has done the last three years), interest expense was reduced. Just like you probably pay down your highest interest debt first, so do companies. Profits (or loss) are determined by subtracting expenses from revenue. Net borrowings or debt repayments are not included in revenue or expenses. I implore you to learn this concept so that you can discuss finances in a more intelligent manner. Saying things like the bolded portion reveals (to the company and your co-workers) a level of ignorance that is simply astounding considering that you used to serve as the TREASURER of your local. It's difficult to discuss concepts and ideas when you lack an understanding of (and an apparent refusal to learn) the facts.

Look, this isnt an audit or a lesson in corporate finance, its a discussion about whether or not AA should continue to get discounted labor from us. No matter how you slice it, no matter what column you put things in, AMR is in better shape than they were when they took those concessions, they are in better shape than they were when we got restored back in 2001. Quibble about definitions and accounting practices if you like, we dont need to be accountants, we know that the company is pulling in more cash than ever before off our labor and we're getting less than ever before , we need to restore balance. The amount of revenue generated per employee has gone up by over $100,000 a year, only taking back $30,000/year is more than fair because once our pay is restored productivity will likely increase even more, thus enabling the company to make even more with less.

Yes, net debt is down substantially, as is total debt. Well, until the third quarter. In the third quarter financials, AMR disclosed that it borrowed at least $755 million:

So what? I dont know of too many big companies that dont borrow money. Even when companies are making record profits they usually borrow money. Thats how Banks make money. AMR is set to bring in $24billion this year plus they have billions in cash. $755 million, that would be like me taking out a $2000 loan with $10000 sitting in the bank.

 

[eolesen]

Carter only served one term.

Bob, you continue to amaze me with your vast knowledge...

...until I read this:

The amount of revenue generated per employee has gone up by over $100,000 a year, only taking back $30,000/year is more than fair

You don't want to be an accountant, yet in the next breath you continue to make asinine assumptions that really is $100K per employee left over after expenses are paid out, and that paying a third of it in raises is justified....

You're right that AMR is healthier today than it was in 2003. It's like the guy down the street from me who lost 100 lbs. Using your logic, he could afford to re-gain 30 lbs and still be healthier than he was before...

This discussion has gone full circle twice. There's not much point in trying to inject any more reality into that (i.e. how much did expenses increase in proportion to revenue?).


You often claim you're providing discounted labor. That may be, but wages are a lot like real estate...

Labor was getting a fairly good deal in the 2000-2001 contracts, just like the guys who were able to sell their houses for twice what they owed on them before the housing bubble burst.

Today, you may think your house is worth $450K, but as more and more people are finding, you're going to be hard pressed to get it when everyone else's house around you is selling for $250K, or worse, going into foreclosure.

 

[Fitty]

QUOTE (eolesen @ Nov 26 2008, 12:13 PM) *
Have at it, Bob. I still think you're living in fantasy land as far as your goal of restoration to 2001 plus inflation.

Obama might appear to be serving out Bill Clinton's third term with his Cabinet picks, but economically, it's just as likely to look like Jimmy Carter's second term. We all know how well labor fared back then...



OMG...Jimmy Carter had a second term..... You should join a Warcraft forum and stay out of Aviation.

 

[eolesen]

Gee, you and Bob jumped all over Carter's second term, but ignored Clinton's third term?

Since it appears you and he don't balance out the views expressed in the MSM a.k.a. Pravda, I'll spell it out for you in language even you should be capable of understanding...

My vote in 1980 kept the damage from the first Carter administration from being able to further screw up the country. Look at my signature (which has been there for about a year).

Obama is a babe in the woods, and so was Carter. Both are well educated and well spoken. The comparisons between the two have been made for months.

Hence, I will continue to refer to the Obama presidency as Jimmy Carter's second term as I have since Super Tuesday.

The only redeeming actions he's done so far is abandon all hope of change by nominating a bunch of Clinton White House insiders.

It's almost as if Hillary had won...


Neither airlines nor unions fared well under Clinton or Carter. I suspect they won't fare any better under Obama. Just keep watching what happens with GM, Ford and Chrysler. Pelosi and Reid (the real power brokers) have already said the likelihood of bailout funds being given to the Big Three outside of bankruptcy is about nil. And bankruptcy stands to gut the UAW's contracts far worse than anything that happened at UAL or NWA.

If the auto makers get bailed out, expect the airlines to be fighting for the chance to be next in line.