AA is for the first time benefitting from chapter 11 as the other carriers did years before. Its not hard to see that AA has turned the corner and still has brand recognition and good hub airports. They are adding new flights and with the arrival of large RJ's, they will be better able to service markets where a 50 seater is too small but an MD80 is too large.
There seems to be a push to add new far east serice where some have claimed AA was weak and they offer the most service to South America.
The difference with AA's filing is that they kept a large amount of cash when compared to some other filings.
My concern is that DP will not be able to deliver on the campaign promises he made and that he will turn AA into just a larger version of US when it comes to customer service.
Now we all wait to see the outcome of the DOJ's law suit.
Unlike some of the other airlines, AA's bankruptcy filing was not driven by a cash shortage or huge debts it could not pay. AA filed for Ch 11 primarily so that it could force the pilots and FAs to accept more efficient labor agreements. A side benefit was to eliminate the TWU's regional ASM cap. AA did not have much unsecured debt that it could flush in bankruptcy - most of its debt was secured by assets it wanted to keep (newer planes, route authorities, slots and gates).
And unlike most other airlines that filed for Ch 11, it lined up billions of dollars in loans before it filed, so that it did not need to secure any Debtor-in-Possession financing. The billions of dollars on hand also meant that it did not need to line up any exit financing. Those with long memories might recall UA's difficulty in getting exit financing when UA's request for ATSB guaranteed financing was rejected.
correct on both counts.
AA did have the benefit of reorganizing in a period when the industry is strong as it is now. UA had the bad fortune of signing expensive labor contracts right before 9/11, partly the result of the failed ESOP and labor's "need" to begin to recoup what was lost under it. Thus, UA labor was unhappy and underpaid going into 9/11 which only made things worse. Add in that UA was disproportionately hurt by the dot.com bust due its N. California strength and UA's problems become more apparent.
DL's primary problem was that it was much slower in shifting its network away from domestic to int'l destinations and was disproportionately impacted post 9/11 as network carriers had to pull capacity which allowed the low fare carriers to grow.
AA is to be credited for making it as long as they did post 9/11 without a BK filing but they did in fact get a lot of the labor cost cuts that other carriers got in BK. AA didn't get rid of all of the debt that other carriers did in BK - DL wiped away about $4B in unsecured debt when it filed and UA about $1.5B - but they did get some debt relief and aircraft refinancing. Thus, it is incorrect to say that AMR was able to make it until 2011 without obtaining any of the relief that the other carriers gained.
It also doesn't change that AA lost a lot of strategic momentum over the past 10 years and that in part is why AA needs the merger to any degree.
Like DL, AA will walk out of BK with a lot of pension obligations that UA and US got rid of so there are both positives and negatives in going later in the process.
As for network, it is still very possible that AA can grow its network to a size necessary to compete with DL and UA. I'm still not convinced AA needs a merger as much as US does but the chances are high that the merger will happen in one form or another anyway.
AA is aggressively building its presence in key markets, including Asia, and its fleet renewal will give AA opportunities to build its domestic system using large RJs that DL and UA have had for years.
But all of this still doesn't change that AA faces 3 large unique strategic challenges that no other network carrier is facing - and they all will happen in a fairly short period of time.... the fall of Wright (or rather greatly reduced restrictions regarding domestic flights), the addition of Open Skies in a number of countries of Latin America which has been AA's financial bread and butter, and the DL-VS joint venture which will challenge AA's presence in the LHR -USA market. AA's Pacific network, while growing, is still not profitable, and it is far from certain that AA can either make their Pacific network profitable or reduce losses to a size that they can justify on an ongoing basis.
All of those events are happening in the next couple years so AA might be able to benefit from the halo effect of BK long enough to overcome these challenges but BK does provide a short-term quick benefit that decreases over time. AA has to fairly quickly address each of those strategic challenges as well as any lingering issues such as labor relation issues if they are to be long-term successful and profitable.
That said, the airline industry at least in the US hasn't been long-term focused in a real long time instead living from crisis to crisis.
