American Airlines boss attacks Chapter 11 law

[Paul]

American Airlines boss Gerard Arpey has turned on his own government's bankruptcy protection law, which, he says, distorts competition and keeps ailing carriers in business.

His remarks, which echo longstanding criticism from BA, come at a time when American and BA are seeking to forge stronger ties.

Speaking from American Airline's headquarters at Fort Worth, Texas, Arpey tore into the way rival US airlines exploit Chapter 11 bankruptcy protection, saying: 'Under Chapter 11, companies can legally renege on their commitments to repay money or meet the terms of their contracts, so they can produce immediate cost savings and create a cost structure that can be difficult to compete with. Chapter 11 is used to perpetuate capacity that has failed.'

BA chairman Martin Broughton said recently that he wanted EU trade commissioner Peter Mandelson to look into the way Chapter 11 operates. He believes the process creates a false market in aviation. American is the only one of the 'big five' conventional US carriers that has stayed out of Chapter 11 since the slump that followed the 11 September terrorist attacks and the hike in oil prices.

Arpey's competitors have used Chapter 11 to wipe out billions of dollars of pensions liabilities.

Congress is unlikely to reform Chapter 11, although US politicians have raised concerns about the way the procedure works. The topic is part of a wider discussion by regulators and governments on both sides of the Atlantic about what constitutes market liberalisation.

The Observer (UK)

 

[TIME FOR CHANGE]

If you cant beat em join em

He wasnt crying that tune when he threatened the unions with bankruptcy

 

[TWU informer]

This appears nothing more that chest pounding looking for some sympathy as AA and BA prepare to merge into one mega carrier.

Aprey is voicing loudly about the competetive disadvantage to those carriers that went BK 11 so that DOJ will look favorably into the AA/BA plans.

 

[777 fixer]

If you cant beat em join em

He wasnt crying that tune when he threatened the unions with bankruptcy

I believe that was Uncle Don who used the treat of BK.

 

[High Speed Steel]

American Airlines boss Gerard Arpey has turned on his own government's bankruptcy protection law, which, he says, distorts competition and keeps ailing carriers in business.

His remarks, which echo longstanding criticism from BA, come at a time when American and BA are seeking to forge stronger ties.

Speaking from American Airline's headquarters at Fort Worth, Texas, Arpey tore into the way rival US airlines exploit Chapter 11 bankruptcy protection, saying: 'Under Chapter 11, companies can legally renege on their commitments to repay money or meet the terms of their contracts, so they can produce immediate cost savings and create a cost structure that can be difficult to compete with. Chapter 11 is used to perpetuate capacity that has failed.'

BA chairman Martin Broughton said recently that he wanted EU trade commissioner Peter Mandelson to look into the way Chapter 11 operates. He believes the process creates a false market in aviation. American is the only one of the 'big five' conventional US carriers that has stayed out of Chapter 11 since the slump that followed the 11 September terrorist attacks and the hike in oil prices.

Arpey's competitors have used Chapter 11 to wipe out billions of dollars of pensions liabilities.

Congress is unlikely to reform Chapter 11, although US politicians have raised concerns about the way the procedure works. The topic is part of a wider discussion by regulators and governments on both sides of the Atlantic about what constitutes market liberalisation.

The Observer (UK)

I view this as a slam to the companies that have failed their employees by placing their destinies in the hands of another. Authorizing another to resturcture with limited sympathy to employees and higher responsibility to creditors and share holders. American as well as the representing bargaining groups have defied this strategy of Chapter 11 to perpetuate capacity that has failed. This reflects strength in working collectively through the tough times.

 

[TWU informer]

I view this as a slam to the companies that have failed their employees by placing their destinies in the hands of another. Authorizing another to resturcture with limited sympathy to employees and higher responsibility to creditors and share holders. American as well as the representing bargaining groups have defied this strategy of Chapter 11 to perpetuate capacity that has failed. This reflects strength in working collectively through the tough times.

So in your mind, maintaining or perpetuation of capacity is OK if it is done through "voluntary" concessions for jobs. But if a carrier perpetuates capacity through Chapter 11 and the Bankruptcy Court that is an industry sin?

I see a small amount of double standard there my friend!

Think about it HSS, jobs jobs jobs requires capacity capacity capacity. The representing bargaining units at AA could have salvaged the employee pay and benefits, reduced capacity, and this would have been much better for both AA and the industry.

Instead, you praise the union leaders and AA management for perpetuating capacity through concession bargaining, not only in tough times, but in properous times as well. The 20+ years of TWU concessions also funded the growth that led to over capacity to begin with. Problem is, when you have screwed the new hired worker out of experience recognition, license pay, and a lengthy top-out pay hurdle, you have placed the company in a bad position because average cost per avialable seat mile is kept lower by the low paid new worker and when you reduce capacity, the low cost worker hits the street so the average cost per ASM goes up.

From the 1983 B-Scales, flex benefits, pre-funding of retirement medical, to the purchase of TWA, American Airlines and the bargaining units within are just as responisble for over capacity as any carrier that failed trying match those industry leading concessions.

Just because you work for AA and are proud that you volunteered industry leading concessions does not mean you are not guilty of perpetuating capacity!

 

[Crapdog]

Wait a minute!!!!!!!! I thought the bankruptcy laws were recently changed. That's why Delta and Northwest filed before the deadline.

 

[eolesen]

The only thing which really changed with the new law is that the exclusivity period for the current management to come forward with a restructuring plan is now 18 months. UA got more than three years without the chance for someone like Bonderman's Texas Pacific Group being able to mount a competing bid.

Had TPG been able to mount a competing bid which kept the employee pensions whole, UA would have been quite the formidable competitor. You might have even seen the employees willing to work with management. Slim chance of that now...

Yes, there were other changes, but this was the one which got the most attention of the failing management at NWA and DAL.

 

[High Speed Steel]

So in your mind, maintaining or perpetuation of capacity is OK if it is done through "voluntary" concessions for jobs. But if a carrier perpetuates capacity through Chapter 11 and the Bankruptcy Court that is an industry sin?

I see a small amount of double standard there my friend!

Think about it HSS, jobs jobs jobs requires capacity capacity capacity. The representing bargaining units at AA could have salvaged the employee pay and benefits, reduced capacity, and this would have been much better for both AA and the industry.

Instead, you praise the union leaders and AA management for perpetuating capacity through concession bargaining, not only in tough times, but in properous times as well. The 20+ years of TWU concessions also funded the growth that led to over capacity to begin with. Problem is, when you have screwed the new hired worker out of experience recognition, license pay, and a lengthy top-out pay hurdle, you have placed the company in a bad position because average cost per avialable seat mile is kept lower by the low paid new worker and when you reduce capacity, the low cost worker hits the street so the average cost per ASM goes up.

From the 1983 B-Scales, flex benefits, pre-funding of retirement medical, to the purchase of TWA, American Airlines and the bargaining units within are just as responisble for over capacity as any carrier that failed trying match those industry leading concessions.

Just because you work for AA and are proud that you volunteered industry leading concessions does not mean you are not guilty of perpetuating capacity!

informer, I don't consider myself as a volunteer as to voting in favor for the concessions. I consider myself as a "martyr" as defined in my Thesaurus as a "sufferer for a cause". I did elect the path of concessions to protect the profession at AA....

 

[Fly]

LMAOOOOOOOOOOOOOOOO....yea,and I'm a martyr too. What's the difference....we both bent over for the high hard one? Regardless of how it got up there....it's there.

 

[High Speed Steel]

LMAOOOOOOOOOOOOOOOO....yea,and I'm a martyr too. What's the difference....we both bent over for the high hard one? Regardless of how it got up there....it's there.

You've been a martyr since you were born Fly, crying because there is a turd in your diaper, qualifies as well

 

[TWU informer]

You've been a martyr since you were born Fly, crying because there is a turd in your diaper, qualifies as well

Just when you think the debate could be professional and half way civil.

THE TRUTH SHOWS THROUGH ONCE AGAIN.

 

[High Speed Steel]

Just when you think the debate could be professional and half way civil.

THE TRUTH SHOWS THROUGH ONCE AGAIN.

How about you informer. Ever needed a diaper change?

O.K. enough of the joking around time to get back on topic.

 

[kiowa]

so--chap 11 laws are bad and should be changed because they don't help aa--- but the wright amendment should stay because it dosen't help aa?

 

[eolesen]

Criticism of the Ch.11 process is nothing new from AMR -- Crandall used to make many of the same points back in the 90's.

The fact remains that every one of these companies failed because they didn't sell their products at a price which covered their costs.

While UA was busy stiffing their employees, shareholders and creditors, they also initiated several fare sales in IAD and DEN at prices which didn't even cover their lower court approved cost structure. Those events were clearly targeted at hurting FlyI and Frontier.

If you're going to go after other carriers when you're still honoring your contracts and paying your bills ontime, that's one thing. But to be able to do it while still under court supervision is another.