MetalMover
Veteran
- Sep 16, 2013
- 3,543
- 2,410
Yet another positive article on AAL
- Thread starter MetalMover
- Start date
- Status
WorldTraveler
Corn Field
- Dec 5, 2003
- 21,709
- 10,662
It's not a question of whether I like it or not. It is a question of whether it is accurate on a long-term basis - which is the basis of the forecasts they are making. And the article is not accurate about the long-term situation for AA.
That doesn't mean AA doesn't have a bright future but it will only be bright upon resolution of a number of major strategic issues.
First, AA's CASM which they note is less than 2% lower than DL's and is growing at a faster rate than DL's. It is very likely that whatever CASM advantage AA has will be gone within a year.
Second, AA has a revenue disadvantage relative to DL'.
Third, AA has achieved its low CASM by flying a lot of nonproductive capacity which forced down their RASM in the key int'l TATL and Latin regions. AA execs said that TATL RASM was hurt by not receiving Star bookings for more than a month but they don't acknowledge that many of the routes that US flies are to Star hubs which won't get any help from oneworld and that capacity will not perform for AA anymore. AA has dumped capacity into Latin America for years in a market share grab and yet recent RASM is down. No responsible company can continue to dump capacity into the market which forces down the price which is exactly what AA is doing.
Fourth, there is absolutely no mention of the impact of the DCA/LGA slot divestitures or the fall of Wright on AA's revenues or costs. It is simply naïve to try to argue that AA won't be significantly impacted by giving away its entire DCA slot portfolio and having new competition in its top 20 DFW markets most of which have had no competition for years. Latin America and LHR competition is also increasing.
Fifth, AA's low costs have been derived from low labor rates that AA people are simply not going to tolerate while the company takes in record profits for the next half dozen years. AA will meltdown in a heartbeat if Parker tries to do to AA what it has done to US people.
Note also that AA's merger synergies are not only the smallest of the big 3 mergers in total dollars despite being last but also the lowest percentage even compared to HP/US.
Sixth, AA has integrated nothing including eliminating the duplicate capacity which was the justification for the merger. It is far from certain that AA will successfully navigate all fo the integration issues without problems.
Seventh, AA's balance sheet improvement will quickly be eliminated as AA takes delivery of hundreds of new aircraft. The only advantage that will be gained from those aircraft is if costs come down and the majority of that cost savings comes by eliminating jobs far more than fuel savings. AA is still grossly overstaffed compared to DL and UA and even more so based on the new aircraft and the smaller network that AA will have after asset divestitures and the eventual elimination of duplicate capacity.
AA does have a bright future but to pretend that everything will be perpetually good again coming right out of BK and before dealing with multiple major strategic issues is simply inaccurate.
That doesn't mean AA doesn't have a bright future but it will only be bright upon resolution of a number of major strategic issues.
First, AA's CASM which they note is less than 2% lower than DL's and is growing at a faster rate than DL's. It is very likely that whatever CASM advantage AA has will be gone within a year.
Second, AA has a revenue disadvantage relative to DL'.
Third, AA has achieved its low CASM by flying a lot of nonproductive capacity which forced down their RASM in the key int'l TATL and Latin regions. AA execs said that TATL RASM was hurt by not receiving Star bookings for more than a month but they don't acknowledge that many of the routes that US flies are to Star hubs which won't get any help from oneworld and that capacity will not perform for AA anymore. AA has dumped capacity into Latin America for years in a market share grab and yet recent RASM is down. No responsible company can continue to dump capacity into the market which forces down the price which is exactly what AA is doing.
Fourth, there is absolutely no mention of the impact of the DCA/LGA slot divestitures or the fall of Wright on AA's revenues or costs. It is simply naïve to try to argue that AA won't be significantly impacted by giving away its entire DCA slot portfolio and having new competition in its top 20 DFW markets most of which have had no competition for years. Latin America and LHR competition is also increasing.
Fifth, AA's low costs have been derived from low labor rates that AA people are simply not going to tolerate while the company takes in record profits for the next half dozen years. AA will meltdown in a heartbeat if Parker tries to do to AA what it has done to US people.
Note also that AA's merger synergies are not only the smallest of the big 3 mergers in total dollars despite being last but also the lowest percentage even compared to HP/US.
Sixth, AA has integrated nothing including eliminating the duplicate capacity which was the justification for the merger. It is far from certain that AA will successfully navigate all fo the integration issues without problems.
Seventh, AA's balance sheet improvement will quickly be eliminated as AA takes delivery of hundreds of new aircraft. The only advantage that will be gained from those aircraft is if costs come down and the majority of that cost savings comes by eliminating jobs far more than fuel savings. AA is still grossly overstaffed compared to DL and UA and even more so based on the new aircraft and the smaller network that AA will have after asset divestitures and the eventual elimination of duplicate capacity.
AA does have a bright future but to pretend that everything will be perpetually good again coming right out of BK and before dealing with multiple major strategic issues is simply inaccurate.
FrugalFlyerv2.0
Veteran
- Oct 29, 2003
- 2,931
- 3,341
As a public service to save people time and prevent people from gagging, here is the WT-speak-to-English-Translation: DL is still better! (no matter what any analysis may show....)
WorldTraveler said:
WorldTraveler
Corn Field
- Dec 5, 2003
- 21,709
- 10,662
The analysts weren't predicting that AA would end up filing for BK for years before they did while Arpey was protecting shareholder value.
I said they would and they did.
I have spoken accurately to a number of key AA strategic issues which professional analysts haven't touched, including AA's losses in the Pacific.
I said they would and they did.
I have spoken accurately to a number of key AA strategic issues which professional analysts haven't touched, including AA's losses in the Pacific.
robbedagain
Veteran
AA has a LOWER COST STRUCTURE than DL
Flying low
Veteran
- Jul 19, 2011
- 629
- 232
And it goes the other way also.
http://www.fool.com/investing/general/2014/04/29/american-airlines-earnings-fly-higher-but-delta-is.aspx
Just depends on which story you read at any given time.
http://www.fool.com/investing/general/2014/04/29/american-airlines-earnings-fly-higher-but-delta-is.aspx
Just depends on which story you read at any given time.
D
DallasConehead
Guest
I don't care about any of it, as long as the wave make its way into the shore for 7 more years when I can get off it.
Flying low
Veteran
- Jul 19, 2011
- 629
- 232
I feel the same way.DallasConehead said:
Kev3188
Veteran
Don't most people?
AdAstraPerAspera
Veteran
700UW said:
FIFY.
WorldTraveler
Corn Field
- Dec 5, 2003
- 21,709
- 10,662
and yet your own coworkers said exactly what the rest of the board has said for years.... employees could care less about the company's success if the employees are prevented from enjoying it.
Parker is already repeating the same strategy he used at US to find every reason not to provide the salary increases that were promised.
Labor jumped all over this merger in hopes of making gains but not only will Parker have to shrink the workforce in order to deal with excess capacity and a larger workforce than DL and UA, but he will find every reason available to not honor the commitments to labor he made - all the while arguing even to the nAAtive workforce that they signed 6 year contracts.
Let's see how well AA does when the honeymoon wears off, the competition that comes from the divestiture process kicks in (AA's current finances are based on them STILL operating all of the slots it has to divest and no competition ), and with the enormous costs of integration, virtually none of which AA has incurred.
Perhaps AA will wildly succeed and I certainly won't slight them if they do.
But to pretend that none of the challenges that I have noted and other professional analysts see don't exist is akin to living with your head under the sand.
Parker is already repeating the same strategy he used at US to find every reason not to provide the salary increases that were promised.
Labor jumped all over this merger in hopes of making gains but not only will Parker have to shrink the workforce in order to deal with excess capacity and a larger workforce than DL and UA, but he will find every reason available to not honor the commitments to labor he made - all the while arguing even to the nAAtive workforce that they signed 6 year contracts.
Let's see how well AA does when the honeymoon wears off, the competition that comes from the divestiture process kicks in (AA's current finances are based on them STILL operating all of the slots it has to divest and no competition ), and with the enormous costs of integration, virtually none of which AA has incurred.
Perhaps AA will wildly succeed and I certainly won't slight them if they do.
But to pretend that none of the challenges that I have noted and other professional analysts see don't exist is akin to living with your head under the sand.
D
DallasConehead
Guest
^^^^^ ThisWorldTraveler said:
- Status
