AA borrows $1.0 billion from Citi secured by AA miles

[Deleted member 14439]

:angry: How much did our group give up? Does 640 mil a year ring a bell? If so the company has saved an ADDITIONAL 960 MILLION DOLLARS on our group alone since may of 2008.. I know all you CPA and CPA wanna be`s will say thats not so but if it walks like a duck and quacks like a duck then.....its a duck. Using this simple reasoning we have self funded a new contract. The company will drag this out laughing all the way.
The TWU cronies on this board spend way too much time tooting their own horn and espousing their lofty efforts rather than getting anything concrete accomplished. All the while my family pays the price, Thanks TWU brothers. When was our last mediation session? June, July? Now we are waiting until november? It would be laughable if not so sad. Let me say though to the negotiating team your minimal effort in securing our lost wages and benefits does not go unnoticed. The same minimal effort is displayed on the hangar floor/ line. Well thats not entirely true. I did have recent occasion while on a trip to Brazil with family to get up and offer my services since the mia crew seemed to be having a tough time. I guess old ehtics die hard.
What will the last 25 years of my carrer look like I wonder? 10/hr mechanic helpers in the hangar? Bi-lingual manuals? Pay for your own insurance 100% ? I`m 1000% positive my retirement will be tossed aside like someones half eaten lunch. Will they continue to buy up dying airlines only to offer their employess a lifeline at my expense?
Do not get me wrong. AA is still a somewhat better than nothing job. It has though turned into just a job, not much passion anymore. The sad thig I see is a company full of smart hard working employees with such potential but the company does not see it or choses to ignore it. I often compare our senior executives with the politicians in washington D.C. They are all out of touch with reality and what is going on at ground level. These groups alll are a "good old boys" network who irreguardless of their bluster, in the end only look out for themselves. This is true of POTUS all the way down to senior executives around the world.
TWU and ,in my opinion, all unions are archaic throwbacks to a time long past. Indeed there was a time when they were desperatley needed to solve working conditions,pay and benefits to name a few. Today however they are nothing more than company partners whose overriding primary concern is the preservation of dues. It matters not to the twu is we are 300 making 30/hr or 3000 making 15/hour as long as they do not suffer a loss of income. End of todays rant. Semper Fi

 

[FrequentFlierCA]

“The market for airline debt is extremely strong right now,â€￾ Runte said in an interview. “Airlines like American and Delta are taking advantage of strong investor demand and rising prices to both raise liquidity and refinance existing debt.â€￾


Bloomberg

Right: strong investor demand at 17%. Fair enough. But who (aside from the fools who run UAL) would want to pay such a crippling rate?

 

[TWU informer]

It does make more sense to borrow money and pay bonuses rather than borrow money to make payroll. I can see that even from where my ignorance sits.

 

[Bob Owens]

AA didn't borrow that money so it could increase your pay. AA borrowed that money to avoid defaulting on its loan covenants and so that it might make it thru the upcoming winter without running out of cash.

Ah those "covenants" again, "you have to keep at least $1billion in cash in order to borrow $800 million". So in other words you pay interest on money you cant use. Zero risk for the lender with guaranteed revenue provided by the borrower. Its just a way of diverting potential profits for the airline to the banks. Its like paying interest on a line of credit that you cant use.

Say AA did borrow enough money to restore everyone's pay for the upcoming year; restoration might easily cost a billion dollars or more each year.

Well if they restore "everyones pay" that would mean that most of the managers would be bumped down to supervisors, and the executives would get no bonuses, that would offset the cost by millions, then you have to consider that there are at least one third less of us to be restored, thats a few hundred million there saved. So AA could easily restore our wages and still be left with significant savings.

With what money would they pay those raises the following year? And the year after that? Is your ignorance of high finance so complete that you don't see the problem with borrowing money to make payroll? Do you really think lenders will keep loaning billions of dollars to AA year after year so that AA can increase rates of pay?

With what money? Some of those billions in increased revenue they've seen since 2003. Maybe 2009 is down compared to 2008 but 2008 was up by $6.7 billion over 2003 with 140 less airplanes and over a third of the workers are gone. You seem to forget that not only did wage expense decrease (despite the raises given to management) but revenue increased, everybody else just grabbed more.

Restore (let alone "Restore and more") ain't gonna happen until AA shows a surplus of money from operations, either because oil drops to $25 or $30/bbl and stays there or the economy shows a tremendous recovery. And I doubt either one happens in the short run.

Well that just aint so. Labor needs to do the same thing the airports, oil companies, banks and other vendors did, dont ask how they are going to pay, just make them pay. If other carriers, who are in the same economy and face the same challenges can pay, then so can AA. I could easily produce figures to the electric company as to why I cant pay my electric bill, however they dont care, I have to pay, so pay I do.

The airports dont look at AA's balance sheet when they decide to raise their landing fees and rents, they just say "Pay me". We have to have to do the same because none of us will live long enough if we wait for the day when AA says they can afford to pay us.

The fact is that AA would be paying our increased wages with the revenue they bring in,(if they have to jack ticket prices or fees up a bit so be it, it's their call) not money they borrowed, they are borrowing this money to buy new aircraft and other projects which keep the debt load up so the banks can make their money. Even airline executives admit that this industry does not make profits, it makes other industries profits. The more borrowed money they sit on the more revenue gets diverted to the banks. As far as I'm concerned they can keep the MD-80s, sure they may burn more fuel than new 737s but does it make sense to borrow billions to replace the fleet which they then they have to stock parts for(requiring them to borrow even more) and pay interest on all that borrowed money? The interest payments offset the fuel savings but all that borrowed money makes the banks rich. The amount of fuel saved wont justify the expense of not only buying the new planes but paying all the interest on that borrowed money.

 

[FA Mikey]

Ah those "covenants" again, "you have to keep at least $1billion in cash in order to borrow $800 million". So in other words you pay interest on money you cant use.

They have a billion in cash. The money they got from CITI can be used for what ever they need.

Well if they restore "everyones pay" that would mean that most of the managers would be bumped down to supervisors, and the executives would get no bonuses, that would offset the cost by millions,So AA could easily restore our wages and still be left with significant savings.

Come on Bob you know as well as the rest of us, restoring pay to its former level will amount to billions. There is no math that shows AA would come out a winner by increasing its bottom line like you describe.

With what money? Some of those billions in increased revenue they've seen since 2003. Maybe 2009 is down compared to 2008 but 2008 was up by $6.7 billion over 2003 with 140 less airplanes and over a third of the workers are gone. You seem to forget that not only did wage expense decrease (despite the raises given to management) but revenue increased, everybody else just grabbed more.

Expenses went up as well, including wages. Prove your point and show who got more who shouldnt have.

The airports dont look at AA's balance sheet when they decide to raise their landing fees and rents, they just say "Pay me". We have to have to do the same because none of us will live long enough if we wait for the day when AA says they can afford to pay us.

For that analogy to work you have to substitute the word customer. Until the time airlines are able to price there product to a level that equals or exceeds expenses, this will continue. There is still to much capacity and carriers on the edge pricing the product at an unsustainable level in order to keep them selves afloat. Crandall was right, bankrupt carriers are killing the industry.

The amount of fuel saved wont justify the expense of not only buying the new planes but paying all the interest on that borrowed money.

Is that the only concern, the cost of fuel? What about maintenance? Dont they save millions in maintenance costs, with new airplanes? I know that was something you and other pointed out about jetblue and its low cost structure with its new planes and lack of need or overhaul in the short term. There is a savings on scheduling, fleet simplification and crew costs.

 

[Bob Owens]

They have a billion in cash. The money they got from CITI can be used for what ever they need.

You obviously dont know what I was refererring to.

Come on Bob you know as well as the rest of us, restoring pay to its former level will amount to billions. There is no math that shows AA would come out a winner by increasing its bottom line like you describe.

You did the math? I'm more concerned with us coming out the winners fot a change.

Expenses went up as well, including wages. Prove your point and show who got more who shouldnt have.

Wage expense went down, check your facts. Look at the 10Ks and compare. Special items alone went up dramatically in 2008, so did rents and several other items, it wasnt just fuel. Wage expense in 2008 was much lower than in 2003 depite the fact that revenue increased by nearly $7 billion.

For that analogy to work you have to substitute the word customer. Until the time airlines are able to price there product to a level that equals or exceeds expenses, this will continue. There is still to much capacity and carriers on the edge pricing the product at an unsustainable level in order to keep them selves afloat. Crandall was right, bankrupt carriers are killing the industry.

Too much capacity? Do you expect passengers to sit on each others laps, or should we install hand holds like the Subway?

Is that the only concern, the cost of fuel? What about maintenance? Dont they save millions in maintenance costs, with new airplanes? I know that was something you and other pointed out about jetblue and its low cost structure with its new planes and lack of need or overhaul in the short term. There is a savings on scheduling, fleet simplification and crew costs.

Sure they may save money on maint costs, but the savings, and the revenue will go to service the debt. If there's too much capacity already why would you want the US fleet size to increase? If we cut the MD-80s loose we could see low cost start ups pick them up and further increase capacity-its happened in the past.

I say wait till AA has the revenue coming in to buy the airplanes without building up its debt. Just like we do with our cars, by the way my car is a 1993.

 

[FA Mikey]

You obviously dont know what I was refererring to.

none of us are mind readers, please enlighten us.

Wage expense went down, check your facts. Look at the 10Ks and compare. Special items alone went up dramatically in 2008, so did rents and several other items, it wasnt just fuel. Wage expense in 2008 was much lower than in 2003 depite the fact that revenue increased by nearly $7 billion.

So you are saying AA has over 7 billions dollars to raise your pay?

Too much capacity? Do you expect passengers to sit on each others laps, or should we install hand holds like the Subway?

No Bob too much capacity, is too many seats out there and airlines lowering the fares to put butts in them. Until we reduce capacity and fares go up to cover costs you can continue to dream of a raise.

Sure they may save money on maint costs, but the savings, and the revenue will go to service the debt. If there's too much capacity already why would you want the US fleet size to increase? If we cut the MD-80s loose we could see low cost start ups pick them up and further increase capacity-its happened in the past.

I say wait till AA has the revenue coming in to buy the airplanes without building up its debt. Just like we do with our cars, by the way my car is a 1993.

So tell me how many old AA MD80s are flying at low cost start ups? How many are competing with us on routes we fly?

Bob when the up keep and associated costs are more than the cost of and associated savings of bringing on a new AC. Its a simple no brainer.

 

[FWAAA]

Bad news for the "restore and more" boosters: AA's minimum required pension contributions in 2010 are estimated to be more than half a billion dollars after contributions of zero in 2009 and minimal in 2008. The 2008-09 contributions were insignificant because of the stock market boom that ended a couple years ago (there's a time lag between the asset decline and increased minimum contributions).

I wish everyone the best of luck in winning large pay raises, but I'd bet against anything more than a token percentage. Even though revenue is way up (as Bob Owens reminds us - he is fixated on that number) since 2002, so are fuel costs and many other expenses. 2009 is shaping up to be about 20% less revenue than 2008, or about $20 billion total instead of almost $24 billion last year. Fuel is down, also, but revenue declines are outpacing the drop in fuel. AA is on target to lose over a billion dollars this year.

Complaining about new fuel efficient planes (AA said the new 738s were 35% more fuel efficient on a seat mile basis) doesn't make any sense to me. AA saves a significant amount of fuel (still very expensive fuel by historical standards), AA gets a maintenance holiday of sorts since heavy overhauls will be reduced, spending on parts will be reduced, pilot training and scheduling costs will decrease - and all it costs is some additional interest expense.

Three and a half years ago, AS began replacing its MD-80s with 738s and said it would save $115 million a year on an investment of $750 million. That's a very fast payback and even if AA's payback is slower, the new 738s are a very good move by AA management. My only gripe is that AA waited three years too long to accelerate the 738 orders.

Here's the AS press release: http://www.alaskasworld.com/Newsroom/ASNew...0313_045635.asp

Too bad AA didn't jump for more new 738s in mid-2004 or early 2005. If it had, most all of the MD-80s would already be retired. And AA's fuel bill last year would have been smaller by a billion dollars or more.

 

[Bob Owens]

none of us are mind readers, please enlighten us.

Back in 2003 AA claimed that they were "technically Bankrupt" even if they had over a billion in cash because of covenenants they had on loans. The Loan was reportedly $800,000,000 and the covenant required that they maintain $1billion in cash. So in effect an $800,0000,0000 loan tied up and made $1billion unusable. So they were paying interest on money they couldnt use, plus $200,000,000.

So you are saying AA has over 7 billions dollars to raise your pay?

Im saying I dont care what AA says they feel they can pay us, if AA expects us to committ to making them number one they have to make us number one in pay. We(mechanics) are number 5, thats unacceptable especially when you consider that the difference is around $10/hr between us and the top and only around $2/hr between us and the bottom.

No Bob too much capacity, is too many seats out there and airlines lowering the fares to put butts in them. Until we reduce capacity and fares go up to cover costs you can continue to dream of a raise.

Maybe they've lowered fares, I'm not saying they are, you are, but they tacked on fees to the tune of hundreds of millions a year.

So tell me how many old AA MD80s are flying at low cost start ups? How many are competing with us on routes we fly?

I dont know how long you've been in this business but if AA cuts loose hundreds of MD-80s you can rest assured that somebody is going to pick some of them up and fly them.Theres still DC-8s out there flying, DC-3s as well.
Delta and Alaska Air, who are both current competitors of AA already operate MD-80s.

Bob when the up keep and associated costs are more than the cost of and associated savings of bringing on a new AC. Its a simple no brainer.

Fair enough but are they? Do you have a breakdown? Like I siad keep them till we are out of the recession and then replace them with the increased revenue that a recovering economy provides, dont expect the workers to pay for them by working for reduced wages.

 

[Bob Owens]

Bad news for the "restore and more" boosters: AA's minimum required pension contributions in 2010 are estimated to be more than half a billion dollars after contributions of zero in 2009 and minimal in 2008. The 2008-09 contributions were insignificant because of the stock market boom that ended a couple years ago (there's a time lag between the asset decline and increased minimum contributions).

Well thats what happens when you dont use common sense and pay your bills when you should. AA should have been setting aside money for the pension but they didnt. They can take that Billion they got for the ad
vantage miles and put it towards trheir pension obligations because without our labor they wont be able to deliver on the miles.

I wish everyone the best of luck in winning large pay raises, but I'd bet against anything more than a token percentage. Even though revenue is way up (as Bob Owens reminds us - he is fixated on that number) since 2002, so are fuel costs and many other expenses. 2009 is shaping up to be about 20% less revenue than 2008, or about $20 billion total instead of almost $24 billion last year. Fuel is down, also, but revenue declines are outpacing the drop in fuel. AA is on target to lose over a billion dollars this year.

Those numbers came a while back, Revenue was down 17% but expenses were down 21%. $20 Billion is still over $2billion more than 2003 and they have around 40,000 less employees and 140 less airplanes.

Complaining about new fuel efficient planes (AA said the new 738s were 35% more fuel efficient on a seat mile basis) doesn't make any sense to me. AA saves a significant amount of fuel (still very expensive fuel by historical standards), AA gets a maintenance holiday of sorts since heavy overhauls will be reduced, spending on parts will be reduced, pilot training and scheduling costs will decrease - and all it costs is some additional interest expense.

Well because nobody is telling you that you should expect continued pay cuts in order to buy somebody else something thats going to save them money.

Three and a half years ago, AS began replacing its MD-80s with 738s and said it would save $115 million a year on an investment of $750 million. That's a very fast payback and even if AA's payback is slower, the new 738s are a very good move by AA management. My only gripe is that AA waited three years too long to accelerate the 738 orders.

No its says they "Expect" to save $115 million a year on operating expenses, now tack on finance charges, the cost of the plane, etc.

Too bad AA didn't jump for more new 738s in mid-2004 or early 2005. If it had, most all of the MD-80s would already be retired. And AA's fuel bill last year would have been smaller by a billion dollars or more.

I have yet to see an airplane that actually delivered on the fuel economy that was claimed it would deliver.

 

[FA Mikey]

Im saying I dont care what AA says they feel they can pay us, if AA expects us to committ to making them number one they have to make us number one in pay. We(mechanics) are number 5, thats unacceptable especially when you consider that the difference is around $10/hr between us and the top and only around $2/hr between us and the bottom.

What airline is paying there mechanics 10 dollars an hour more than AA?

Maybe they've lowered fares, I'm not saying they are, you are, but they tacked on fees to the tune of hundreds of millions a year.

And yet the entire industry is still losing money.

I dont know how long you've been in this business but if AA cuts loose hundreds of MD-80s you can rest assured that somebody is going to pick some of them up and fly them.Theres still DC-8s out there flying, DC-3s as well.
Delta and Alaska Air, who are both current competitors of AA already operate MD-80s.

So who has picked up the ones we already parked? Delta is not in a position to pick up additional airplanes and Alaska dumped theirs and with real not made up numbers says it is cheaper dump the MD80s in favor of the 738.

Fair enough but are they? Do you have a breakdown? Like I siad keep them till we are out of the recession and then replace them with the increased revenue that a recovering economy provides, dont expect the workers to pay for them by working for reduced wages.

Everyone is already working for reduced wages. Everyone has been working for reduced wages. Everyone will continue to. Wait until a recovering economy, then all you will be saying is they are spening all there money on new planes when they should be putting that money to employee compensation.

 

[Bob Owens]

What airline is paying there mechanics 10 dollars an hour more than AA?

Southwest and UPS, Continental is on their way and UAL comes up in December. Currently we are #5 in pay, according to the company website.

And yet the entire industry is still losing money.

So, what else is new? The industry has been losing money, and expanding for the thirty years I've been in it.

So who has picked up the ones we already parked? Delta is not in a position to pick up additional airplanes and Alaska dumped theirs and with real not made up numbers says it is cheaper dump the MD80s in favor of the 738.

"Expectations" are necissarily real.

Everyone is already working for reduced wages. Everyone has been working for reduced wages. Everyone will continue to. Wait until a recovering economy, then all you will be saying is they are spening all there money on new planes when they should be putting that money to employee compensation.

You apparently are content, so let them use your raise to buy new airplanes-I want my money and I'm willing to shut down the airline if I dont get it. I'd rather see AA shut their doors if they cant pay and let airlines that can pay expand, our toolboxes have wheels for a reason.

 

[FA Mikey]

Southwest and UPS, Continental is on their way and UAL comes up in December. Currently we are #5 in pay, according to the company website.

I asked what airline pays there mechanics (as you stated) 10 dollars more an hour than AA?

"Expectations" are necissarily real.

My expectation was you would dodge and not answer the question. See sometimes they are real.

You apparently are content, so let them use your raise to buy new airplanes-I want my money and I'm willing to shut down the airline if I dont get it. I'd rather see AA shut their doors if they cant pay and let airlines that can pay expand, our toolboxes have wheels for a reason.

Come on, its been how many years since the cuts were approved? AA now should fear a shut down?

 

[Bob Owens]

I asked what airline pays there mechanics (as you stated) 10 dollars more an hour than AA?

Done, and its "their" not "there".

My expectation was you would dodge and not answer the question. See sometimes they are real.

In your mind, along with "AA loves you and its a family".

Come on, its been how many years since the cuts were approved? AA now should fear a shut down?

The pot doesnt always boil over as soon as its put to the flame. Maybe not a shutdown but a continued decline in performance at any rate.

 

[FA Mikey]

Thanks for the grammar lesson. I guess that is what you do when you cannot answer the question.