A look at AA

[chipmunn]

The U.S. airline industry is in an unprecedented financial crisis and I thought it would be interesting to evaluate the situation at AA, the largest US airline. Here are a few points:
AA job loss:
Q2 2001 – 128,000 employees
Q3 2002 – 111,000 employees
Q1 2004 projection – 94,000 employees
In two years AA plans to reduce its job force by 27 percent and 34,000 employees
AA fleet plan:
Q2 2001 – 893
Post September 11 reductions (unknown, aircraft like the B727s, B717s, & DC9s)
Announced reductions – 83 aircraft (74 F100s & 9 B767s)
Short-term storage – 42 aircraft (28 MD80s and 14 B767s)
Aircraft reductions – 125 aircraft + post September 11 reductions of older aircraft like the B727s, B717s, and DC9s.
AA Financial Loss
2001 Loss - $1.76 billion or $11.43 per share
2002 first nine month loss - $2.98 billion or $19.19 per share
In a prepared statement AMR said, “if the revenue environment remains depressed, the company expects to post a sizable operating loss in the fourth quarter, most likely exceeding the third quarter loss before special items.†If AMR posts an loss equal to or greater than its $525 million third quarter loss, the airline will lose at least $3.23 billion in 2003, an incredible amount of money.
In addition, earlier this month, AMR said it would record a $990 million charge to write off all goodwill on its balance sheet and on Friday said it could face a charge against shareholder equity of more than $1 billion to cover its minimum pension liability unless investment returns improve by year end.
Clearly these results are unsustainable and the industry problems are not isolated to US or its current management team.
Chip

 

[Bob Owens]

Gee, I wonder if the IRS would object if I claimed a deduction for Goodwill on my next tax return?

 

[MileHighGuy]

Chip, can Carty do anything other than declare bankruptcy to save AA?

 

[jimboli]

Goodwill is not deductible for tax purposes with respect to stock acquisitions. Goodwill is deductible for asset purchases over 15 years.

However, just because the goodwill is being written off for book purposes as of 1/1/03, does not mean it can be written off for tax purposes. Since the assets are still in service, the goodwill will continue to be amortized over the original life of the goodwill.

 

[Oliver Stone''s Apprentice]

[blockquote]
Chip says:
Q2 2001 – 128,000 employees
Q3 2002 – 111,000 employees
Q1 2004 projection – 94,000 employees
[/blockquote]

Chip, you've got some mixed up numbers here. The 128,000 and 111,000 figures are for all of AMR, not just AA. Knock off 12,000 for Eagle and other subs.

The 1Q04 projection of 93,000 is for AA alone as best I can tell, and based on the already announced layoffs of 7,000.

 

[planemech669]

Chip,

Are you sure about those numbers?

If that is the case, then by the end of this year alone AA would be at a -130,000 plus employees thus making it the largest if not the only ghost airline in the business!


Active Emplyees as of Feb 2002

American Airlines 100,756
TWA LLC 10,730
American Eagle 11,334
Total 122,820