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AA BK Decision Tues. 20th Sept.?

Someone else quoted WT as saying "usually, a reorganization in BK results in a change of mgmt"

Not sure I agree with that as a blanket statement.

I'm sure in the DL-centric world, it might seem that way --- Gerry Grinstein made it clear he wanted to retire once the reorganization was done, and at his age, I wouldn't fault him for that. And DL's management team was essential labeled as incompetent by the judge ("I have not heard anything that I will say remotely impressed me that you have the money, the talent, or the thought that you could successfully reorganize in this case.")


If a group like TPG steps in and tries to reorganize a dysfunctional company, yes, they'll want to put their own management in place. That's what happened with the second CO bankruptcy (Bonderman brought in Bethune) and with US Airways (Bronner booted Seigel, and replaced him with Lakefield).

I don't think Hawaiian had any changes whatsoever in their filing. Neither did Mesa, and they filed after the 2005 changes. If ever there was a poster child for booting management, it's Mesa.

UA didn't really change over any management. Tilton made some changes along the way, but things didn't really turn over until Smisek showed up last year. I don't recall NW having a whole lot of turnover from their filing (Steenland was there until the merger, no?). AC didn't (I know, they're Canadian...) since Milton is still the chairman of ACE.


The only predictable measure for a change of management is when the CEO turns over. And the only way that seem to happen is a large investor like TPG or Retirement Systems of Alabama coming in and exerting enough control to force a change.

Good luck waiting on that, guys. I think you'd be better off just figuring out how to work with the current guys. If there's a filing, you're likely to be stuck with them thru the reorganization.
 
There will be no filing for at least 18 months. Obviously that can change in the event of a major
national disaster or world disaster; otherwise I expect AMR to keep limping along for awhile.
 
I think bankruptcy is coming soon for AA (although I hope it does not happen) please keep in mind what happened over at Delta, If we (USAair)get involved in any way shape or form you must fight it off the best you can, you do not want anything to do with this operation, I'm sure most of you know how bad things are over here. Good Luck to all of you!!!!
 
Actually, there are studies that have been done that show that the rate of replacement of management in the larger business community has increased since the 2005 changes in BK laws. There has been no major airline BK since the laws changed so looking back at what happened w/ DL or UA or anyone else is not terribly relevant to what might happen today.
The 2005 laws shifted a process that already gave creditors a much more prominent role in the running of the company (outside of BK) an even more prominent role inside of BK.
In C11, mgmt's highest priority is to protect the interests of the creditors even if at the expense of other parties. The 2005 changes gave mgmt a shorter period and fewer liberties to turn the business around before the creditors can assert to the judge that their interests are not being made first priority.
Thus, there is ample evidence in the business community that mgmt turnover is more common now than it was prior to 2005.
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part of the advantage for airlines, including AMR, is that the majority of their debt is aircraft debt which generally has very predictable values and for which creditors usually cannot borrow up to the full market value of the aircraft. OTOH, AMR has already said that they will have to perform impairment tests on their fleet in the 4th quarter because virtually the entire fleet is mortgaged. Older owned aircraft like the M80s and much of AE's RJ fleet might be overvalued which could mean that AMR might be forced either to pay down some of the debt to bring the "mortgages" in line with the value of the assets or take on other debt - if it can find any other collateral to mortgage. A BK filing could be triggered if AA's fleet is undervalued relative to the mortgages on it.
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On the other side, AMR has little if any unsecured debt - which is wiped out in BK.
However, pension obligations that are rejected in BK do create a liability to those impaired which for the majority of employees the impaired party is the PBGC. Insomuch as there are pension benefits above the PBGC's limits, the company itself could become liable. AA's pilot pension is different from that at other US airlines so the type of impairment and the ensuing claim would not be the same for AA's pilots as it was for other network airline pilots.
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Remember that creditors in BK become the new stockholders of the reorganized company. If the interests of the creditors are harmed and if they do not believe that mgmt can ensure that they will receive an adequate return, the creditors can force a change in control and the 2005 BK law changes improve the chances they can succeed in their request.
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The 120 day rule also means the chances of a hostile takeover are quite slim if mgmt can demonstrate they can successfully reorganize. Even afterwards, it is not a given that creditors will succeed at forcing a hostile takeover if mgmt can demonstrate they have a better plan.
Remember that the reason DL fought off the US takeover attempt was because DL was able to convince the creditors DL could create more value under a standalone DL than if acquired by US, esp. since US' merger scenario was based on shrinking DL.

Remember also that companies have only 120 days to present a mgmt led plan of reorg which also means that the time available to spend in BK without losing control of the company. Given that the fastest successful BK in US airline history was DL's at 20 months and DL had just one major union to deal with, the risk is very high that AA mgmt could fail to meet the terms of the new BK laws.
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It could also be argued that NW's BK - filed in the same court on the same day as DL's - was done with the intent of merging w/ DL. Thus there would be few people who would want to have led NW only to have sold out within months
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Hope of a buyout from a turnaround company is not terribly likely given that the way those groups make money is by leveraging the company with debt = that is what happened to NW 20 or so years ago. AMR doesn't have anything else that can be used as collateral making it unlikely that an LBO or investor would be interested.
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Because of AMR's leverage and lack of unmortgaged collateral, the prime source of cost savings in an AMR BK would come from the employees.
thus, the largest calculus for AMR mgmt is when they could be most successful in extracting wage cuts while minimizing potential damage to the business.
Given that it is the TWU that AA appears to be setting up for the largest cuts at the expense of the pilots and FAs, the timing comes down to maintenance capabilities - and likely the introduction of the new aircraft.
As has been noted, AA is already beginning to shift maintenance out of the company and leaving maintenance facilities un or underused.
 
AMR market cap is flirting with under $1B.

http://www.marketwatch.com/story/airline-stocks-replay-2009-on-recession-fears-2011-09-30?siteid=yhoof

"And yet 2012 is not going to be 2009, when airlines posted a 24% year-over-year drop in revenue, said J.P. Morgan analyst Jamie Baker said, who expects industry revenue to drop next year by just around 12%. "

A 12% revenue reduction if felt equally by AMR would cost more than $2B.
 
AMR close @ $2.96

AMR has now a market cap less than
$1 billion.

When does the BOD going to wake up
and fire our innep management.
 
You Dont want DP he still hasnt been able to complete the mess he has with US!
 
Mr Red said:
About time for ICAHN to appear !
Click to expand...
<_< ------- Remember, Uncle Carl still has a score to settle with AA over AA screwing him out of Karibu in the TWA bankruptcy! It seems he had that Company ear marked to go to his than wife, in a divorce settlement, and had to make other arrangements, which, I hear, really pissed him off!!!
 
damajagua said:
AMR close @ $2.96

AMR has now a market cap less than
$1 billion.

When does the BOD going to wake up
and fire our innep management.
Click to expand...

A company's market capitalization isn't a great indicator of whether or not it will file bankruptcy. Market cap is too greatly influenced by broader swings in the stock market (which we've been seeing a lot recently) to be a reliable indicator of a company's financial health.

Much more important are cash on hand and upcoming debt maturities. If a company AA's size gets down near $1 billion in unrestricted cash (a long way to go for AMR) that's when you start looking for the lawyers on the courthouse steps.
 
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