Deal signed to outsource some flying!

[JFK Fleet Service]

50 seat CRJ's? Aren't they money losing holes in the sky like the 37 and 44 seat EMB's?

"Diversify our regional feed" Ahhh MBA buzzwords...Gotta' love it.

 

[eolesen]

Diversification here might make a little sense, in that something like a work stoppage or FAA shutdown at one carrier doesn't shut down the entire operation...

It also provides the company with some negotiating advantage, which is probably why the unions hate it.

 

[will fix for food]

Diversification here might make a little sense, in that something like a work stoppage or FAA shutdown at one carrier doesn't shut down the entire operation...

It also provides the company with some negotiating advantage, which is probably why the unions hate it.

It will be back to the pre-97 whipsaw of the Eagles.

It makes sense to outsource the 50 seat feed. They are all old aircraft and expensive to maintain. Even if Skywest passes on the fuel cost to AMR they will still be on the hook to maintain an older airframe. That being said, I expect Eagle, or whatever name they end up picking, to maintain a small fleet of 50 seaters. Probably around 30 or so.

I thought the four year contract for Skywest was pretty short until it was pointed out that they probably want to run shorter contracts in order to maximize the potential for playing one carrier against the other.

 

[will fix for food]

You do realize that management has told us they will stick with the 79 seat restriction, don't you?

They left the door open though. I expect that sometime in the future they will pull the "do this for us or we will put bigger planes at the regional affiliates" game on you.

 

[BoeingBoy]

They left the door open though.

Not really. As I recall the original term sheet it covered RJ's up to 88 seats, which means upper 70-ish seats with FC since the E190 would hold more than 88 with FC (US's E190's have 99 seats with a 3 row FC section). What can change is the number of larger RJ's - the pre-existing scope limit disappears.

Jim

 

[WorldTraveler]

It also provides the company with some negotiating advantage, which is probably why the unions hate it.

DL, UA, and US have all played one regional carrier against another for years while AE has been much less exposed to it. Adding AA to the list won't help the plight of RJ employees but given that there will be a draw down in 50 seaters throughout the industry, AA's ability to use other regional carriers might actually provide a short term offset to some of the cuts that otherwise might come.

It makes sense to outsource the 50 seat feed. They are all old aircraft and expensive to maintain. Even if Skywest passes on the fuel cost to AMR they will still be on the hook to maintain an older airframe. That being said, I expect Eagle, or whatever name they end up picking, to maintain a small fleet of 50 seaters. Probably around 30 or so.

I thought the four year contract for Skywest was pretty short until it was pointed out that they probably want to run shorter contracts in order to maximize the potential for playing one carrier against the other.

part of the reason DL wants to dump the 50 seaters fairly quickly is to avoid engine overhauls which will come due in the next few years... it is therefore not likely that AA/AE could avoid the same costs and thus AA is not interested in signing deals that subjects them to the same costs.

Further, if the point is to trade in as many of the ERJs as possible for Ejets, AA needs to have some 50 seat capacity that will not be affected by that transaction.

 

[Super FLUF]

They left the door open though. I expect that sometime in the future they will pull the "do this for us or we will put bigger planes at the regional affiliates" game on you.

Even IF they did that, there was never even a restriction on "interline agreements", nor was there a restriction on domestic codeshare even under the green book. And yes, there was a reason that the company did not pull the trigger on this. Both the company and union had boxed themselves in on prior precedent and contractual language that would have opened the door to other "problems".

I'm guessing you didn't know this, or else you wouldn't have made the original ridiculous statement. Maybe I am wrong. Care to elaborate on how we "screwed ourselves"? What is the company allowed to do that either wouldn't have been allowed under the green book or the LBFO?

Thanks.

 

[john john]

Diversification here might make a little sense, in that something like a work stoppage or FAA shutdown at one carrier doesn't shut down the entire operation...

It also provides the company with some negotiating advantage, which is probably why the unions hate it.

Is this your M.O. you seem passionate about it

 

[will fix for food]

I'm guessing you didn't know this, or else you wouldn't have made the original ridiculous statement. Maybe I am wrong. Care to elaborate on how we "screwed ourselves"? What is the company allowed to do that either wouldn't have been allowed under the green book or the LBFO?

Thanks.

That wasn't me that said that.

Thanks

 

[frontline]

I'm not surprised by this. I think the only people that are surprised by this are the people who thought that somehow we could go through a bankruptcy and come out witihout big changes like this. Well guess what, reality is now setting in. Welcome to the new American Airlines.

 

[eolesen]

Is this your M.O. you seem passionate about it

The only thing I'm passionate about is making sure Obama is packing for a move to Hawaii 90 days from now.

Whatever happens at AA is up to the employees at this point. My money is being spent elsewhere for now, and it's going to take a lot more than a cheap fare to win back my trust and wallet share.

 

[Crash Pad DCA]

The only thing I'm passionate about is making sure Obama is packing for a move to Hawaii 90 days from now.

Aloha and Mahalo for your passion!

 

[FWAAA]

Picture of a Skywest CRJ after its American Eagle repaint:

 

[WorldTraveler]

In June, an Embraer executive said that Embraer expected a huge order from AA in 2012 once the contractual issues were resolved:

http://www.aviationw...3-02-464940.xml

how many total EMB jets did AA succeed in rejecting in the BK process? Seems to me that I read they will still have 175 50 seat or smaller jets well past 2017, including a number of which are not 50 seaters.

We may not know how many EMB jets AA actually thought they could reject but they still will have a fairly sizable small RJ fleet for years to come.

 

[FWAAA]

how many total EMB jets did AA succeed in rejecting in the BK process? Seems to me that I read they will still have 175 50 seat or smaller jets well past 2017, including a number of which are not 50 seaters.

We may not know how many EMB jets AA actually thought they could reject but they still will have a fairly sizable small RJ fleet for years to come.

I recently came across the huge filing about the re-negotiated debt on the ERJs - I'll post a link to it if I can locate it again. If I recall, almost all (maybe all) of them were financed by Embraer's finance arm or an affiliated company in Brazil. None were leased.

Basically, all of the 37 seaters will be gone within a short time. About half are already grounded/surrendured and the rest are on very short-term leases with the last running thru the end of 2013.

AA and the lenders agreed to substantial write-downs for the 44 seaters (the "scope-busters") and they'll remain for a while. Of the 50-seaters, some were written down (not as much as the 44-seaters) and on others, AA agreed to re-affirm without any write-downs.

That leaves Eagle with 118 50-seaters and 59 44-seaters, or 177 total, so your estimate of 175 was dead-on.

The interesting part about the filing was the lack of redactions. Boeing and Airbus values are closely guarded, but the filing is full of numbers about the amount owed on each Embraer and some hints about the FMV of the planes as well. Although AA still owed about $2 billion total, on many of the planes, AA had paid down a significant portion of the principal, leaving a relatively small amount owed on each plane. Although there is almost no market for 37-50 seaters, I wonder if there's any future for some of these planes as corporate aircraft? Some of the 37 seaters can be had for $1.5 million, a pittance compared to the purchase price of a new plane.

Article summarizing the write-downs of the ERJs: http://www.dallasnew...rcraft-debt.ece

Motion to approve compromise on ERJ debt: http://www.amrcasein.../4936_15463.pdf

AA owed about $1.75 billion on the ERJs and this deal will reduce that balance by $670 million, or about 38%.