Would employees be interested in buying the airline

[wrencher]

It is hard to kill an airline. Look at how long Eastern, Pan Am, Braniff, and TWA kept going long after they started losing money. There is always someone out there with more money (and ego) than sense (think Icahn and Lorenzo) who on a slow day thinks, "I can succeed where others have failed." And, then coughs up the money to buy the airline. At our current capitalization, that would not be hard to do. The stock closed at $1.80 yesterday. It would only take about $150 million to buy 1/4 of the company. For that matter, it would only take $603 million to buy the whole think...lock, stock, and barrel.

yes but you would be buying the 12 billion plus of debt too.

 

[Barfbag]

With AA stock hovering at incredible lows, I believe the company can be bought for less than a billion dollars. Would the unions.........errr......the employees be interested in buying the company? Control your own destiny.

Keeping in mind that UAL employees tried the same a decade ago,and we know how that turned out.

I'm surprised BA's Walch hasn't figured a way around the foreign airlines minority law and found an American company to front BA's long- term goals.

 

[jimntx]

yes but you would be buying the 12 billion plus of debt too.

Not really. You let AMR go into BK and abrogate all possible debt, then you buy. And, once in BK, it will takes less than the $603 million. That figure is based on the closing price of the stock yesterday. It will be worth MUCH less in BK.

The only worry would be if some of the debtors realized that forcing a Ch. 7 liquidation (highly possible) would garner them a bigger payout. Our airplanes at Friendly Joe's Used Airplane Mart are worth more than the current market capitalization of the company.

 

[FWAAA]

Not really. You let AMR go into BK and abrogate all possible debt, then you buy. And, once in BK, it will takes less than the $603 million. That figure is based on the closing price of the stock yesterday. It will be worth MUCH less in BK.

That would be akin to setting fire to your $603 million (or the lesser amount you spent on AMR stock after the bankruptcy filing). If you buy the AMR stock once AMR has filed for Ch 11, your stock will be wiped out and replaced with the new stock given to the unsecured creditors. Those who held the old stock of US, UA, DL and NW have nothing to show for their ownership. Each company issued new stock to the unsecured creditors and cancelled the old stock.

If you want the new stock of AMR once it files, then buy up securities like AAR (unsecured AMR publicly traded notes). Holders of that security will be among the unsecured creditors whose debt will be traded for new equity.

 

[MCI transplant]

yes but you would be buying the 12 billion plus of debt too.

<_< ------ Wrencher, you have a short memory. Ichan used TWA money to buy out the Company in a leveraged deal! Then mortgaged everything of value, put the money in his pocket, and when he decided there was nothing left of value, walked away leaving the bankruptcy court to sort out the mess!

 

[Buck]

So Einsteins help me out here. What happens to common stock shares?

Could you explain the difference between Chapter 7 and Chapter 11 under the new rules and how it would affect the airline and the indusrty.

Can the employees but the airline in bankruptcy? From $12 billion to $603 million is quite attractive. I just checked my assets and $7000 is not much.

Lets see if I work overtime everyday for the rest of my career, then I could be an owner in retirement.

 

[FWAAA]

So Einsteins help me out here. What happens to common stock shares?

In Ch 11 (or Chapter 7), the existing stock is canceled and has no value unless all the creditors (holders of AA debt) are fully paid or provided for. That happens like once in a million bankruptcies.

Could you explain the difference between Chapter 7 and Chapter 11 under the new rules and how it would affect the airline and the indusrty.

The 2005 bankruptcy code amendments shortened the period during which existing management has an exclusive right to file its plan of reorganization, shortened the time during which certain leases can be rejected or affirmed and made it more difficult to pay retention bonuses to executives. Ch 11 is a reorganization where creditors get the new stock (old stock is cancelled) and the company gets another chance. Ch 7 is a liquidation where the assets are auctioned off and debt is paid and everyone loses their jobs. Ch 11 is probably preferable for the employees (and maybe others as well).

Can the employees but the airline in bankruptcy? From $12 billion to $603 million is quite attractive. I just checked my assets and $7000 is not much.

You could do as jimntx suggested but your stock would become worthless and you wouldn't get the new stock. See my response to jimntx's post. The employees could buy the company in bankruptcy but it would probably cost a lot more than the current market cap. The time to buy all the stock in AMR was in 2003. The employees could have fired the board and all the executives and replaced them with your own choices. If things had gone as well as they did for Arpey and Co., your investment would have been worth about $41/share in January, 2007 (after being in the $2/sh range for many of the weeks leading up to the concessions and $5/sh on the day the concessions were imposed).

 

[eolesen]

Not really. You let AMR go into BK and abrogate all possible debt, then you buy. And, once in BK, it will takes less than the $603 million. That figure is based on the closing price of the stock yesterday. It will be worth MUCH less in BK.

The only worry would be if some of the debtors realized that forcing a Ch. 7 liquidation (highly possible) would garner them a bigger payout. Our airplanes at Friendly Joe's Used Airplane Mart are worth more than the current market capitalization of the company.

Sorry, Jim, but there's very little unsecured debt to abrogate. I haven't looked for a number, but the letter from the DCa APA base chair summed that up quite nicely.

Anyone buying the company is still on the hook for assuming andaying off the lions share of the existing debt.

Don't pay and the banks start repo'ing airplanes, real estate, and even slots if I recall. Won't be much of an airline left at that point.

 

[MCI transplant]

<_< ------ What initially got Ichan interested in TWA was the amount of cash our management had on hand. And the fact that our CEO was going around bragging how undervalued our stock was at that time.---------Now, how much in cash does AA have on hand? :huh: Could history repeat itself? ------ You betch yea!!!

 

[jimntx]

Sorry, Jim, but there's very little unsecured debt to abrogate. I haven't looked for a number, but the letter from the DCa APA base chair summed that up quite nicely.

Anyone buying the company is still on the hook for assuming andaying off the lions share of the existing debt.

Don't pay and the banks start repo'ing airplanes, real estate, and even slots if I recall. Won't be much of an airline left at that point.

Well, I don't know how much protection the BK court could give AMR against those repossessions. But...

I think the real danger is a yard sale breakup of the company. The a/c and the routes are worth more than the market capitalization. One of the reasons that Texaco does not exist today is because the value of the company assets was greater than the market capitalization; so, Chevron bought Texaco, and then liquidated the assets (for the most part) and most of the employees. During that time while the name of the "new" company was ChevronTexaco, I said that to one of my friends still working there. Her response was "Jim, you're mispronouncing the name of the company. The Texaco is silent."

Ask yourself, what do you think other airlines would pay for the LHR slots and/or the South American routes? What about airlines tired of waiting in line for new (or almost new) 737s and 777s?

 

[FWAAA]

Well, I don't know how much protection the BK court could give AMR against those repossessions.

A ch 11 filing provides an automatic stay against repossession, but eventually, the stay would be lifted as to collateral on which the debtor is not paying and then the debtor must pay the secured debt or face repo of the collateral.

I think the real danger is a yard sale breakup of the company. The a/c and the routes are worth more than the market capitalization.

Substantially all aircraft and all valuable routes/slots currently serve as collateral to secure various debt, and that debt likely exceeds the market value of AA's assets. AA has a negative net worth.

 

[texflyer]

So please help me out here...........

1. The unions do not want to buy the company because they do not trust each other or themselves?

2. The unions want a new management and board of Directores (might as well) but have no idea who they would want to lead the airline?

3. Do the unions want to merge with US?

I would like a an honest answer to the above questions? No BS, no management speak, no union speak. There are those who work for AA who are the sole provider for their households, they do not post on discussions forums like this, they do not have the time, they are struggling to make it in this economy. I want to know what THEY think of this whole situation.

 

[WorldTraveler]

Ask yourself, what do you think other airlines would pay for the LHR slots and/or the South American routes? What about airlines tired of waiting in line for new (or almost new) 737s and 777s?

and note that in an asset acquisition there is much less assurance that the employees will go with the assets....
also, AA by any stretch of the imagination, received very good deals on its fleet of new aircraft... it might be worth acquiring AA solely for the contracts that they negotiated for new aircraft.
But AA has alot of CURRENTLY operating assets which are very valuable...
.
AA will have to work very hard, very fast to turn the company around or the creditors will be forced to listen to the chorus that will be rightly arguing that they can make better use of AA's assets than AA.

 

[Hopeful]

So please help me out here...........

1. The unions do not want to buy the company because they do not trust each other or themselves?

Nothing to do with trust but reality...I don't want 80000 owners...i want a good management team who looks beyind blaming labor for all its ills!

2. The unions want a new management and board of Directores (might as well) but have no idea who they would want to lead the airline?

Yes, somebody along the lines of Gordon Bethune, Herb Kelleher and yes, even Bob Crandall. The trouble is the BOD is more concerned with who is "next" in succession and cronyism,

3. Do the unions want to merge with US?

No! Mergers are nothing but headaches to employees of both carriers. It may help the airlines as it eliminates a carrier, but nothing but discord will exist among all employees!

I would like a an honest answer to the above questions? No BS, no management speak, no union speak. There are those who work for AA who are the sole provider for their households, they do not post on discussions forums like this, they do not have the time, they are struggling to make it in this economy. I want to know what THEY think of this whole situation.

In this day and age, I don't know any worker who's spouse does NOT work.....You might be referring to the executive class whose spouses play tennis in the morning and head to the gym with their personal trainers in the afternoon. Then go home and prepare the evenings' activities with the other members of exececutive spouses club.

 

[BoeingBoy]

Someone touched on it in relation to TWA - AA had $4.2 Billion in "cash" (cash and short-term investments) at the end of the 3rd quarter. Don't know how that's changed since, but using that figure a corporate raider could offer current stockholders triple the market price for AA stock (an outlandish overpayment), pay for it with AA's own money, and still have over $2 Billion left to pocket while owning AA completely. Then just start selling pieces till all that was left had no value - things like employees - and shut it down.

That little scenario could be the biggest threat to AA in the short term. Bankruptcy is the biggest threat in the intermediate term because management could lose control of the process, especially if the exclusivity period ended with no viable POR in place.

Jim