AA BK Decision Tues. 20th Sept.?

[eolesen]

Perhaps you should edit to say "proverbial steps"....

Bob Owens was quite insistent that, since there are no actual steps to the NY courthouse, the company was clearly lying about their intentions to file back in 2003.... 😉


I do agree that market cap is misleading, but the thought of someone making a less than friendly intended run on the stock is always increased. At least up to the point where they have to disclose their ownership stake (required once you hit 5%?).

You can't just go and expect to buy up 50%+1 share of stock and take control. Not without the institutional shareholders driving up the price.

Cash available vs. immediate debt maturities is usually the better canary in the coal mine.

 

[WorldTraveler]

Having a very low market value only indicates that the notion that you are protecting shareholders is not as much of an excuse any longer.
It still doesn't change the fact that it may not be possible for AMR to successfully reorganize within pretty short 120 day window that current law allows for mgmt to file their own plan of reorganization. Thus, the risk of losing control becomes a significant issue - and it significantly opens the door to a hostile takeover or the carveup of AMR - neither of which is in the interests of AA employees or their current mgmt.
.
As long as AMR can continue to protect the interests of its creditors which isn't hard to do since most of its debt is secured and continue to refinance its debt, using any available asset as collateral against future borrowings, and AMR is able to maintain decent cash levels - likely at least $3B, there may be no rush for the courthouse steps - proverbial or not.
.
And if AA does head for court, it will be extraordinarily costly for employees who likely are the only meaningful way that AA can reduce its costs.
At this point, the least painful course of action might be to continue with business as usual, even if it does nothing to solve the longer-term issues.

 

[WorldTraveler]

As of noon, network airline stocks are in a free fall compared with the DOW which is practically flat.

Indications of weakening traffic including on in't routes- the basis of the network airline model - and continued fears of deepening economic problems in the US have sent LCC down about 6%, DAL down 7%, UAL down about 9%, and AMR down 18%. Low fare carriers are faring better with LUV down 3% and ALK down 2%.

There were also several downgrades in the sector and another not-so-flattering article in the WSJ about AA.

 

[AANOTOK]

As of noon, network airline stocks are in a free fall compared with the DOW which is practically flat.

Indications of weakening traffic including on in't routes- the basis of the network airline model - and continued fears of deepening economic problems in the US have sent LCC down about 6%, DAL down 7%, UAL down about 9%, and AMR down 18%. Low fare carriers are faring better with LUV down 3% and ALK down 2%.

There were also several downgrades in the sector and another not-so-flattering article in the WSJ about AA.

It's coming, it's as simple as that! And of course labor will get the blame while management will get credit for doing
all they could to prevent it.

 

[Frank Szabo]

... while management will get credit for doing
all they could to prevent it.

... and to that I'll say their collective ass sucks bilgewater ...

 

[eolesen]

WT has claimed a couple times now that management only has 120 days to fix things before being booted out of the way. That's not quite true.

Mesa Airlines spent 14 months in bankruptcy.

120 days is the minimum exclusivity period. Under S1121, exclusivity can be extended at the judge's discretion for up to a maximum of 18 months to submit a plan of reorganization, and another 60 days beyond that to solicit votes for a plan of reorganization.

A judge is under no obligation to extend beyond 120 days, but it's pretty widely thought that in a complex case (and I'd expect something the size of AMR to be considered complex), extensions would be likely granted.

If after the minimum 120 days or maximum 18/20 months, a plan still has not been submitted/voted on, then competing offers could be considered.

In Mesa's case, they got their original 120 days, and two additional 120 day extensions under S1121. They got approval on their plan to take the company private before the third 120 period expired.


What I think would be more likely with AMR is a pre-packaged filing. Pre-packs are said to be up since 2005.

 

[WorldTraveler]

WT has claimed a couple times now that management only has 120 days to fix things before being booted out of the way. That's not quite true.

Mesa Airlines spent 14 months in bankruptcy.

120 days is the minimum exclusivity period. Under S1121, exclusivity can be extended at the judge's discretion for up to a maximum of 18 months to submit a plan of reorganization, and another 60 days beyond that to solicit votes for a plan of reorganization.

A judge is under no obligation to extend beyond 120 days, but it's pretty widely thought that in a complex case (and I'd expect something the size of AMR to be considered complex), extensions would be likely granted.

If after the minimum 120 days or maximum 18/20 months, a plan still has not been submitted/voted on, then competing offers could be considered.

In Mesa's case, they got their original 120 days, and two additional 120 day extensions under S1121. They got approval on their plan to take the company private before the third 120 period expired.


What I think would be more likely with AMR is a pre-packaged filing. Pre-packs are said to be up since 2005.

if there are competing offers, you can bet the judge will find it hard to be convinced that it is in AMR's creditors' best interests to continue to give management time. AMR is full of assets that the entire industry wants to get their hands on.
The only advantage AMR mgmt would have in extending the time they have to file a plan of reorg is to impose more pay cuts on employees, which is the ONLY WAY that AA can be turned around w/o starting to carve the airline into pieces.
As has been true throughout this ordeal, the longer the process drags on, the deeper the cuts are that AA/AE employees will have to endure.

Pre-packaged BK requires consent among the parties... it is highly doubtful that AA's labor unions are going to consent to cuts in BK when they haven't already.

 

[jimntx]

Pre-packaged BK requires consent among the parties... it is highly doubtful that AA's labor unions are going to consent to cuts in BK when they haven't already.

I think you are right on in this respect. Now, as this is my 5th career and I can retire at any time after the end of next January with full benefits (assuming I am able to remain on the payroll until then ), I don't much care what the unions do or don't do. It would be easy for me to tell them to tell the company to go jump in a lake with their pre-packaged BK. I can always sign up for Medicare for my medical benefits, and I don't "need" the piddly little pension I will draw from AMR. Others are not so fortunate. I just flew with 2 f/as who have been with the company almost 30 years. They are still having to fly high time just to pay their bills. Neither of them is old enough to "retire."

The real tragedy is that pre-packaged or not, when BK comes (and at this point I don't see how it can be avoided), the same bunch of jokers that brought the company to this point will still be in charge. No doubt the day AMR emerges from BK, they will award themselves major bonusses. I wonder if they will even express any sympathy for the thousands of employees who have either lost their jobs completely or had to take serious cuts in pay and benefits.

I know that market cap is not necessarily an accurate measure of a company's viability, but if the considered wisdom of the market (and I trust the overall market's judgement of the investment value of a company) is that AMR is worth $663 million (market cap, close of market today) and the overall debt and "other obligations" (such as underfunded pension plans) is in the neighborhood of $30 billion, I don't see that as sustainable. Like Eastern, Pan Am, Braniff, et al, we are running out of furniture to throw on the fire.

 

[jimntx]

Pre-packaged BK requires consent among the parties... it is highly doubtful that AA's labor unions are going to consent to cuts in BK when they haven't already.

I think you are right on in this respect. Now, as this is my 5th career and I can retire at any time after the end of next January with full benefits (assuming I am able to remain on the payroll until then ), I don't much care what the unions do or don't do. It would be easy for me to tell them to tell the company to go jump in a lake with their pre-packaged BK. I can always sign up for Medicare for my medical benefits, and I don't "need" the piddly little pension I will draw from AMR. Others are not so fortunate. I just flew with 2 f/as who have been with the company almost 30 years. They are still having to fly high time just to pay their bills. Neither of them is old enough to "retire."

The real tragedy is that pre-packaged or not, when BK comes (and at this point I don't see how it can be avoided), the same bunch of jokers that brought the company to this point will still be in charge. No doubt the day AMR emerges from BK, they will award themselves major bonusses. I wonder if they will even express any sympathy for the thousands of employees who have either lost their jobs completely or had to take serious cuts in pay and benefits.

I know that market cap is not necessarily an accurate measure of a company's viability, but if the considered wisdom of the market (and I trust the overall market's judgement of the investment value of a company) is that AMR is worth $663 million (market cap, close of market today) and the overall debt and "other obligations" (such as underfunded pension plans) is in the neighborhood of $30 billion, I don't see that as sustainable. Like Eastern, Pan Am, Braniff, et al, we are running out of furniture to throw on the fire.

 

[robbedagain]

i dont know how much truth there is to this but today a coworker of mine told me that AA has stopped mail contracts?? and another coworker told me that AA is adjusting their schedule to be very similar to ours at US if there is truth could you inform me? also there was some rumor that if AA goes CH11 US East would be the one to merger with and the West would "disappear"" I have doubts about it but thats just what I heard

 

[Buck]

i dint know how much truth there is to this but today a coworker of mine told me that AA has stopped mail contracts?? and another coworker told me that AA is adjusting their schedule to be very similar to ours at US if there is truth could you inform me? also there was some rumor that if AA goes CH11 US East would be the one to merger with and the West would "disappear"" I have doubts about it but thats just what I heard

Post office: AA doesn't deliver

Posted 2/16/2005 6:33 AM

The Postal Service wants to scrap American Airlines' contract for domestic mail delivery — possibly costing the airline millions. "They were not meeting the goal of on-time performance," Jim Quirk, a U.S. Postal Service spokesman, tells the Fort Worth Star-Telegram (free registration). "We gave them time to meet goals and they didn't." American disputes that, insisting the contract is valid. The airline concede, though, that talks are underway. "We're having a conversation about the nature of our relationship, but our contractual relationship with the Postal Service has not changed," an AA spokesman said. American picked up $22.4 million from domestic and international mail delivery during the first nine months of last year, government figures show. "Revenue is revenue, and right now American doesn't have a lot of it," said Robert Mann, an airline industry analyst and consultant with R.W. Mann. Posted at 7 a.m. ET

 

[Mrs. McFly]

The USPO is in a much bigger world of hurt and is more than desperate to shed costs. That is all that rumor is.

 

[Buck]

The USPO is in a much bigger world of hurt and is more than desperate to shed costs. That is all that rumor is.

No there is more than that, it is old news

Posted 2/16/2005 6:33 AM

 

[eolesen]

I'd also heard from someone who used to work in Cargo that AA was finally giving up on the USPS, not the other way around. Revenues probably aren't supported by the amount of manpower that has to be thrown at it.

The service story from 2005 was little more than a pissing match over paperwork and scanning the mail, not the actual service. Either way, there were around 500 jobs at jeopardy at the time, and the problems were fixed. IIRC, it was a break-even at best proposition back then. With declining volumes, it's probably costing the airlines money to handle what little first class mail is left for them to pick up vs. being flow on FDX.


Creditors and shareholders do have to be in agreement on a prepackaged filing, but I don't see anything that explicitly requires labor's consent.

AA's unions will certainly have claims against the estate, but unlike some other bankruptcy filings i.e. the IAM holding the paper to UAL's ground equipment, they're not a creditor.

Creditors will no doubt want some degree of confidence on what would happen with labor, but I'd think enough of them have the common sense to be able to read the writing on the wall, and guess how contracts might be restructured in S1113.

Now... If the pilots come to an agreement (with the understanding that they won't see S1113 as Hawaiian did in their pre-pack), that might be more than enough to win creditor support.

The real tragedy is that pre-packaged or not, when BK comes (and at this point I don't see how it can be avoided), the same bunch of jokers that brought the company to this point will still be in charge.

<sarcasm>Yes, it would appear that the three unions will survive. </sarcasm>

 

[robbedagain]

thanks I didnt realiz that was oldnews regarding the usps.