Goose, AA has not paid down $9 billion of debt since the concessions were imposed on you. Not even close.
AA's net debt has declined some, mainly because its cash balance has grown substantially while some debt was paid down in 2004-08. Since 2008, however, AA has re-borrowed all it paid down and then some. Net debt is total debt minus the cash balance. In 2002, when the cash balance was just over a billion, the net debt was almost as large as the total debt. A couple years ago, when AA's cash balance hit $6 billion, its net debt was, of course, reduced.
Since 2003, AA has sold about $2 billion of new stock in several different stock offerings. In that same time, AA has sold assets like its stakes in Orbitz and Hotwire and the reservation system of which TWA was part-owner (I can't remember which one). AA has also sold its stake in ARINC and recently sold American Beacon. All together, those assets brought about $2 billion of cash. So by furniture burning, AA has added about $4 billion to its cash balance.
Helping bolster the cash balance was the cash flow from operations. Overly simplified, cash flow is determined by adding back non-cash expenses (like depreciation and amortization) to the net income (or net loss).
When AA buys an airplane, it doesn't write off the entire purchase price the year it buys it. Instead, accountants demand that it be written off slowly - say, over 30 or 40 years. So each year, a portion of all those shiny 777s and 738s bought 1999-2003 (as well as all the prior airplane purchases, like 767s and 757s and MD-80s) is subtracted on the income statement. If the airline is going to keep replacing old airplanes, it really should be able to profit enough to cover that percentage written off each year. But since the concessions were imposed, AA's cash flow has been barely positive. AA hasn't earned enough to really pay for all the airplanes it bought 10 years ago.
Since 2001, AA has radically changed. For the several years before then, AA would post profits of half a billion to a billion a year (and sometimes more) even AFTER the depreciation expense and AFTER paying profit sharing of roughly $300 million a year to the employees. But for nearly all of this decade, AA's year to year goal has been simply preserving enough cash to cover the next disaster, be it fuel price spikes to $147/bbl or another war or another SARS event or a crippling recession where revenue falls by more than 20% year over year.
I don't see any hidden income - it's all out there in the open. But it's like you or Bob selling your sofa and dining room set and depositing the money to make certain that your checks won't bounce in the coming months. Would you seriously entertain a request from your kids for more money? But Dad, we saw that cash you got from selling the furniture. Would you give your housekeeper or gardener a raise just because you sold some assets? I wouldn't. The AA paycheck is still rediced, even though you added some cash to your balance sheet. Well, fares are still down. Not just at AA, but at every airline.
Since the concessions were imposed, AA has reported net income in two years. The other years have shown losses. 2009 will show huge losses. Regardless of the cause you want to assign to those losses (clueless, incompetent management or just really bad luck shared by every legacy airline), the fact is that AA's operating income hasn't covered its expenses since 2001.
I'm not particularly confident that AA's income will ever cover its expenses again.
In my view, Arpey made a valiant effort at righting the ship. He paid down a little debt, raised some cash, imposed massive concessions on the employees without terminating the pilot pension (and spending wildly in bankruptcy like UA did). In the process, he looted enough gold thru the PUP/PSP plans so that he's set for life. I suspect that he'll muddle along trying to keep AA's head above the waves, but in the end, I don't see a return to the late 1990s heyday. Oil is still around $80/bbl despite a deep recession. Imagine what it will cost if the economy improves and demand increases. Treading water isn't the key to long-term success.
Unfortunately, I don't see Arpey and the other management team having what it takes to actually climb out of the water for the long-term. Carty thought the effects of September 11 would be short-lived (no doubt everyone hoped that). Turns out those effects continued for a long time, depressing AA's income until shortly before the recent boom ended. AA's yield finally recovered, just in time for oil to quadruple in price.
Unless you're very close to retirement, it's delusional (in my view) to think working for AA will ever resemble the prosperity enjoyed in 1994-2001. If you're under 50, you aren't too old to find employment (in your current field or a new occupation) that will support your family. Inertia will cause many current employees to continue muddling along with Arpey until the end, but that won't be satisfying, either financially or emotionally.
