AA moves to reject leases on six more MD-80s and 11 757s

[will fix for food]

http://www.aviationweek.com/aw/generic/story_generic.jsp?channel=aviationdaily&id=news/avd/2012/01/18/04.xml&headline=AMR%20To%20Retain%20Most%20Of%20Fleet%20In%20First%20Stage%20Of%20Chapter%2011


More fleet news.

 

[FWAAA]

http://www.aviationweek.com/aw/generic/story_generic.jsp?channel=aviationdaily&id=news/avd/2012/01/18/04.xml&headline=AMR%20To%20Retain%20Most%20Of%20Fleet%20In%20First%20Stage%20Of%20Chapter%2011

More fleet news.

Aviation Week should be embarrassed for publishing such a poorly written, error-filled article.

Some examples: The previous rejection filing was for ATR-72s, not ATR-42s (they're at FedEx, IIRC). The current rejection filing is for 11 757s and six MD-80s (not 10 and seven as the article claims). The article incorrectly claims that AA's remaining 757s are owned - in fact, there are still 29 leased 757s which AA could still reject.

And that doesn't even begin to address the erroneous legal conclusions asserted by the author. The conclusion that AA is retaining most of its leased MD-80 fleet is premature - since AA has another week to file more lease rejections. None of the ERJs are leased, contrary to the implications of the author.

 

[Buck]

Aviation Week should be embarrassed for publishing such a poorly written, error-filled article.

Some examples: The previous rejection filing was for ATR-72s, not ATR-42s (they're at FedEx, IIRC). The current rejection filing is for 11 757s and six MD-80s (not 10 and seven as the article claims). The article incorrectly claims that AA's remaining 757s are owned - in fact, there are still 29 leased 757s which AA could still reject.

And that doesn't even begin to address the erroneous legal conclusions asserted by the author. The conclusion that AA is retaining most of its leased MD-80 fleet is premature - since AA has another week to file more lease rejections. None of the ERJs are leased, contrary to the implications of the author.

I called Aviation Week today and they are embarrased.

An attorney said? Of course AA owns them on a lease. Until AA is released from there obligation in court those aircraft are still the companies. They are still maitain them and they are in service. Some are even at TIMCO.

 

[BoeingBoy]

Of course AA owns them on a lease.

Just a small technical correction...

Airplanes, like new cars, are either owned or leased but not both. If you lease a car, at the end of the lease you turn it over to the dealer because you never owned it. A leased airplane is turned over to the lessor at the end of the lease - the lessor owns the airplane. If you buy a car, using borrowed money with the car being collateral for the loan, you pay the loan off and own the car. An airplane, likewise, can be the collateral for a loan that provides the money to buy the plane. When the loan is paid off, the airplane is owned by the airline.

The only real difference is the cost of the asset (car or plane) and the useful life. While you may lease a car for 36 months, a lease on a new plane is 10 years or longer. Same with borrowing to buy a new plane - a car may be a 36-60 month loan while a new plane entails a loan for 10 or more years.

Jim

 

[Buck]

Just a small technical correction...

Airplanes, like new cars, are either owned or leased but not both. If you lease a car, at the end of the lease you turn it over to the dealer because you never owned it. A leased airplane is turned over to the lessor at the end of the lease - the lessor owns the airplane. If you buy a car, using borrowed money with the car being collateral for the loan, you pay the loan off and own the car. An airplane, likewise, can be the collateral for a loan that provides the money to buy the plane. When the loan is paid off, the airplane is owned by the airline.

The only real difference is the cost of the asset (car or plane) and the useful life. While you may lease a car for 36 months, a lease on a new plane is 10 years or longer. Same with borrowing to buy a new plane - a car may be a 36-60 month loan while a new plane entails a loan for 10 or more years.

Jim

Yes, but for all practical purpose AA "owns" as an operational asset.

 

[BoeingBoy]

FWIW today AA filed a motion to extend the section 1110 deadline for a number of planes. NOTE: this gives AA longer to decide which planes to keep but otherwise does not interfere with the section 365 process for rejecting planes.

Jim

 

[FWAAA]

Yes, but for all practical purpose AA "owns" as an operational asset.

While that's generally true, that's irrelevant to the issue of the error in the article, since leased airplanes are treated somewhat differently than owned airplanes in bankruptcy. The article said "Included in this rejection are 10 Boeing 757-200s, effectively leaving the airline with only owned 757s . . . " Which is clearly false, as the rejection of 11 leased 757s leaves AA with 29 leased 757s instead of the incorrect bolded portion.

I called Aviation Week today and they are embarrased.

An attorney said? Of course AA owns them on a lease. Until AA is released from there obligation in court those aircraft are still the companies. They are still maitain them and they are in service. Some are even at TIMCO.

I can't tell what portion of this represents your original ideas and words and what portion you are attributing to Aviation Week, but I would bet money that AA is not paying Timco to perform a heavy C check on a leased 757.

 

[chris perry]

Someone recently posted that they heard that only 60-some 757s would receive the cabin refurb, including the new IFE, leaving more than just these 11 out in the cold, probably to be rejected. The MD-80s that are receiving upgrades would undoubtedly be the last to be retired.


I've posted it before, and I'll say it again: AA is not performing the contractual lease return maintenance on the aircraft that are being rejected. The lessors of the initial batch of MD-80s and F100s objected, but AA was permitted to reject the planes without performing any of the maintenance specified in the leases. In the filing, AA undertakes to pay for the storage maintenance program for the stored planes. That's what bankruptcy law requires, not what the leases say.

They are doing lease return maint and engine changes to match serial numbers,its listed daily on maintenance BOW.This many be the case for the aircraft that have been sitting for years. Two 757's are at DWH getting engine changes and paint jobs over the stripes now today.

 

[chris perry]

No matter what the documents say the engines and accessories are being matched...It's being handled just like the 727's when they were retired...The Md80's coming through Dallas are being matched if needed and then ferried to ROW.Although most engines and app have already been matched,this BK has been planned for a long time.

 

[Buck]

While that's generally true, that's irrelevant to the issue of the error in the article, since leased airplanes are treated somewhat differently than owned airplanes in bankruptcy. The article said "Included in this rejection are 10 Boeing 757-200s, effectively leaving the airline with only owned 757s . . . " Which is clearly false, as the rejection of 11 leased 757s leaves AA with 29 leased 757s instead of the incorrect bolded portion.


I can't tell what portion of this represents your original ideas and words and what portion you are attributing to Aviation Week, but I would bet money that AA is not paying Timco to perform a heavy C check on a leased 757.

I thought that the call to Aviation Week was rather original.

Anyway, you are correct. The four 757's are not leased aircraft.

 

[aapitbull]

No matter what the documents say the engines and accessories are being matched...It's being handled just like the 727's when they were retired...The Md80's coming through Dallas are being matched if needed and then ferried to ROW.Although most engines and app have already been matched,this BK has been planned for a long time.

Have you not been reading the forums? well if you had you would know the company has not been planning this we forced them into it LOL on a related noted we had 627 all ready to go to the desert, pilots on board & bang Hyd line in the wheel well lets loose, I guess the old girl was just not ready to go, so back to the barn try again tomorrow.

 

[damajagua]

How much longer before the fleet plans are finalized?

 

[Frank Szabo]

... I should have taken one sock off so I could count to 11 - I had counted 10 ...
Jim

If you have to count past 20, please don't tell us about the experience - K?
[/sarcasm]

 

[FWAAA]

They are doing lease return maint and engine changes to match serial numbers,its listed daily on maintenance BOW.This many be the case for the aircraft that have been sitting for years. Two 757's are at DWH getting engine changes and paint jobs over the stripes now today.

No matter what the documents say the engines and accessories are being matched...It's being handled just like the 727's when they were retired...The Md80's coming through Dallas are being matched if needed and then ferried to ROW.Although most engines and app have already been matched,this BK has been planned for a long time.

I don't doubt that AA is performing some pre-return activities, but AA is not performing all of the standard lease return maintenance items specified in typical lease documents and today filed another response to lessee objections where lessees are complaining that AA isn't doing everything their lease requires. Engine matching and engine installation? Sure. If AA is painting over the stripes, that's because AA wants to do that, not because it's doing what the lessors want.

5. The Debtors have worked diligently to facilitate return of the Excess Leased Equipment. The Debtors are in the process of aligning the original engines with the correct airframe, hanging the engines on the wing, making the Excess Equipment and the related Aircraft Records available on or before the applicable Effective Date proposed in the Motion, and responding to requests for inspection.

19. In seeking to impose numerous burdensome “return conditions” onthe Debtors, the Objecting Parties wrest the words “surrender and return” in section 1110(c) out of context, as if they existed not to preserve a lessors’ right to immediate access to its property but instead to saddle the Debtors’ estates with the delay and expense of navigating through a thicket of lease and market obligations.

http://www.amrcaseinfo.com/pdflib/793_15463.pdf

AA also disclosed in this filing that it has reached agreement with lessors of two of the 11 757s and that AA will keep those two 757s under revised (presumably cheaper) lease terms. Additionally, the filing indicates that AA will retain at least three of the MD-80s for a while (probably for nominal rent).

 

[Buck]

AMR Corp. (AAMRQ) Says Value of Boeing (BA) 757s Used in Domestic Markets 'Not Recoverable,' Will Take Charge