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American Eagle and Bankruptcy
- Thread starter Buck
- Start date
- Joined
- Aug 20, 2002
- Messages
- 7,319
- Reaction score
- 1,555
American Eagle
Two months ago, most industry watchers were scratching their heads about the investment reasoning for American Eagle as parent AMR intended to spin it off. High unit costs largely stemming from a very senior workforce, along with a fleet that was built around an archaic scope clause at mainline American Airlines, defined the carrier. I am confident virtually every carrier comprising the regional industry had little to no fear that Eagle was going to steal any potential business.
Now with bankruptcy and the freedoms to cut costs, American Eagle may look very different coming out of court-assisted restructuring. Fleet alignment is sure to occur, and is happening, with any and all 37 and 44-seat aircraft immediately being taken out of service. Certainly there are numerous out-of-market leases on aircraft controlled by the parent that can be reduced. In fact, we may see a new market rate established for a 50-seat aircraft that takes into account a $120 per barrel jet fuel environment. Labor rates and rules are sure to be reduced. If the ground handling services Eagle offers were the crown jewel pre-bankruptcy, just imagine how much more attractive Eagle’s rates to other carriers will become after the restructuring.
Don’t let the point regarding a new ownership market rate that takes into account the high cost of jet fuel get lost. While Eagle might be successful, it is likely that Pinnacle will not. This factor is potentially significant. If a new rate can be found through the bankruptcy process along with reduced labor rates, suddenly for American, a number of small markets served could be removed from the chopping block and remain a part of the reorganized American network.
Whatever the size of Eagle when it emerges, it is going to be much leaner than the majority of its competitors. My guess is SkyWest, Pinnacle, ExpressJet and others are watching this restructuring with bated breath because a new market rate for 50-seat flying, and other flying for that matter, will present itself in the coming months. And a new competitor for future regional flying will emerge.
American Pilot Scope and Pilot Negotiations at United-Continental
As American and its pilots union attempted to negotiate a new agreement up until the time the company filed for bankruptcy protection, certain aspects of what was being discussed were leaking into the mainstream media. The game changer being discussed was the new A319 fleet would be flown at rates and rules much lower to reflect the difficult economics of the domestic business and appropriately reflect the market/aircraft size.
If this is indeed the road American travels down in its Section 1113 negotiations, there are significant and immediate ramifications for the negotiations taking place between United-Continental and its pilots. As the UA-CO pilots spend more time taking on the company using safety as a hot-button, a new baseline is about to be established as to how pilots work and get paid. If the UA-CO are hung up on nothing more than 50 seats, then I ask: what about 115 seats?
The United-Continental pilots’ strategy to exert a leverage point blew up in their face on November 29, 2011. Where AA is going is in the right direction as it accomplishes multiple things that will benefit their business: 1) it is better able to match costs with the domestic revenue environment; and 2) it puts an end to the pilot scope discussion. Regional partners will not be doing any 100 seat flying because, in this seat range, mainline pilots have a better ability to match the cost of flying done by the regionals.
Whether United-Continental pilots either figure it out (or not), the focus then shifts to Delta where scope is already a hot button issue. In 2013, US Airways pilots are absolutely going to be forced to consider something similar to what the AA pilots are likely to agree to.
Then you just have to wonder what Gary Kelly is really thinking. The tables just may be turning.
Two months ago, most industry watchers were scratching their heads about the investment reasoning for American Eagle as parent AMR intended to spin it off. High unit costs largely stemming from a very senior workforce, along with a fleet that was built around an archaic scope clause at mainline American Airlines, defined the carrier. I am confident virtually every carrier comprising the regional industry had little to no fear that Eagle was going to steal any potential business.
Now with bankruptcy and the freedoms to cut costs, American Eagle may look very different coming out of court-assisted restructuring. Fleet alignment is sure to occur, and is happening, with any and all 37 and 44-seat aircraft immediately being taken out of service. Certainly there are numerous out-of-market leases on aircraft controlled by the parent that can be reduced. In fact, we may see a new market rate established for a 50-seat aircraft that takes into account a $120 per barrel jet fuel environment. Labor rates and rules are sure to be reduced. If the ground handling services Eagle offers were the crown jewel pre-bankruptcy, just imagine how much more attractive Eagle’s rates to other carriers will become after the restructuring.
Don’t let the point regarding a new ownership market rate that takes into account the high cost of jet fuel get lost. While Eagle might be successful, it is likely that Pinnacle will not. This factor is potentially significant. If a new rate can be found through the bankruptcy process along with reduced labor rates, suddenly for American, a number of small markets served could be removed from the chopping block and remain a part of the reorganized American network.
Whatever the size of Eagle when it emerges, it is going to be much leaner than the majority of its competitors. My guess is SkyWest, Pinnacle, ExpressJet and others are watching this restructuring with bated breath because a new market rate for 50-seat flying, and other flying for that matter, will present itself in the coming months. And a new competitor for future regional flying will emerge.
American Pilot Scope and Pilot Negotiations at United-Continental
As American and its pilots union attempted to negotiate a new agreement up until the time the company filed for bankruptcy protection, certain aspects of what was being discussed were leaking into the mainstream media. The game changer being discussed was the new A319 fleet would be flown at rates and rules much lower to reflect the difficult economics of the domestic business and appropriately reflect the market/aircraft size.
If this is indeed the road American travels down in its Section 1113 negotiations, there are significant and immediate ramifications for the negotiations taking place between United-Continental and its pilots. As the UA-CO pilots spend more time taking on the company using safety as a hot-button, a new baseline is about to be established as to how pilots work and get paid. If the UA-CO are hung up on nothing more than 50 seats, then I ask: what about 115 seats?
The United-Continental pilots’ strategy to exert a leverage point blew up in their face on November 29, 2011. Where AA is going is in the right direction as it accomplishes multiple things that will benefit their business: 1) it is better able to match costs with the domestic revenue environment; and 2) it puts an end to the pilot scope discussion. Regional partners will not be doing any 100 seat flying because, in this seat range, mainline pilots have a better ability to match the cost of flying done by the regionals.
Whether United-Continental pilots either figure it out (or not), the focus then shifts to Delta where scope is already a hot button issue. In 2013, US Airways pilots are absolutely going to be forced to consider something similar to what the AA pilots are likely to agree to.
Then you just have to wonder what Gary Kelly is really thinking. The tables just may be turning.
