AMR Can Reject Some Engine, Jet Leases: Judge

[Hatu]

AMR Corp. (AMR), the bankrupt parent of American Airlines, won permission to reject some of its leases on about 900 aircraft as it reorganizes with a more competitive fleet.

U.S. Bankruptcy Judge Sean Lane in Manhattan court today granted the third-largest U.S. airline company’s request to end contracts including those for engines and related equipment after AMR made changes in its plan to resolve objections by City National Bank, U.S. Bank National Association and AWAS Aviation Services Inc. AMR didn’t say how much money was involved.

http://www.bloomberg.com/news/2011-12-22/amr-can-reject-some-engine-aircraft-leases-bankruptcy-court-judge-rules.html?cmpid=yhoo

 

[WorldTraveler]

What is significant is not the action on leases but that the judge is not signing off on AMR's financial mgmt plans including cash and investments. Remember that AA is the first major carrier that has wanted to continue using hedges which are a financial risk to the creditors; AA's plans to continue business as usual the way it wants to define it while restructuring in court will likely have to be modified to the desires of the creditors to protect their interests - and the C11 process which is designed for that purpose.

 

[jimntx]

At the top of the article, it says the company has been given permission to reject leases on 900 (???) a/c. Further down it says the company is seeking to restructure the leases on 340 a/c. First off, I thought we only had about 600 a/c total. I don't understand.

 

[FWAAA]

At the top of the article, it says the company has been given permission to reject leases on 900 (???) a/c. Further down it says the company is seeking to restructure the leases on 340 a/c. First off, I thought we only had about 600 a/c total. I don't understand.

It's a very poorly written article, but to be fair, it says that AMR "won permission to reject some of its leases on about 900 aircraft." AMR has about 900 planes between AA and Eagle.

 

[damajagua]

They are probably talking about the specific leases and engine parts that AMR asked to be release from.
I believe these could be aircrafts that are already parked.

 

[Buck]

They are probably talking about the specific leases and engine parts that AMR asked to be release from.
I believe these could be aircrafts that are already parked.

Overall there are not that many aircraft parked in comparison to those in service. I read this morning that some the lease returns, as AMR is in a hurry to exit bankruptcy, will be taken of quickly but the the new aircraft schedule will be longer period. Also AMR is on the 787-9 list with something like 48 airplanes in 2015-6 and another 58 a few years later.

 

[BoeingBoy]

So far, all AA has asked for in respect to returning leased/mortgaged aircraft applies to some of those in storage. The judge approved that. The judge also approved AA's request to continue hedging fuel, although with some small limitations desired by the creditor's committee - no more than 60% of anticipated needs and 10 days for the creditor's committee to review any new hedge agreements.

Jim

 

[Kellerguy]

Overall there are not that many aircraft parked in comparison to those in service. I read this morning that some the lease returns, as AMR is in a hurry to exit bankruptcy, will be taken of quickly but the the new aircraft schedule will be longer period. Also AMR is on the 787-9 list with something like 48 airplanes in 2015-6 and another 58 a few years later.

Agree--they want to either exit or shorten nearly all of the leased aircraft fleet, which was their published plan when they announced the Boeing/Airbus purchase. That is consistent with everything they have said. The only exceptions are likely to be those that intended to keep. Having approval to do that--if they can get the a/c creditors to agree--would allow them to phase them out in an orderly manner as the new aircraft arrive. should the creditors not agree, it would set the stage for lots of them to be grounded. I doubt that happens to many but it's possible.

 

[Buck]

Agree--they want to either exit or shorten nearly all of the leased aircraft fleet, which was their published plan when they announced the Boeing/Airbus purchase. That is consistent with everything they have said. The only exceptions are likely to be those that intended to keep. Having approval to do that--if they can get the a/c creditors to agree--would allow them to phase them out in an orderly manner as the new aircraft arrive. should the creditors not agree, it would set the stage for lots of them to be grounded. I doubt that happens to many but it's possible.

Yes and those leases are being renegotiated to more favorable terms.

 

[damajagua]

From today ruling it seems like AA got almost everything it has asked
up to now.

 

[BoeingBoy]

AA did negotiate some minor changes with the creditor's committee, but basically got everything it wanted. Expect that to continue.

Jim

 

[damajagua]

AA did negotiate some minor changes with the creditor's committee, but basically got everything it wanted. Expect that to continue.

Jim

Am sure it will be the same outcome when the 1113
proceedings get on the way.

 

[Kellerguy]

From today ruling it seems like AA got almost everything it has asked
up to now.

They will get virtually everything they ask for, that is after all the purpose of bankruptcy reorganization. The court is only interested in a successful relaunch of the business.

 

[WorldTraveler]

They will get virtually everything they ask for, that is after all the purpose of bankruptcy reorganization. The court is only interested in a successful relaunch of the business.

as long as it is done in a way that is allowable under BK laws which have a high value on protecting the interests of the creditors... that is why the judge noted that he could not approve AA's cash mgmt and financial plans because it involves derivative contracts/hedges which are not usually part of BK and AMR's plans regarding managing those activities does not conform w/ what is acceptable in BK.

 

[JFK Fleet Service]

"AMR can continue hedging its jet fuel costs through Morgan Stanley (MS), Lane said.According to an order he signed after the hearing, bankruptcy rules will be lifted to allow AMR to make payments and grant security to the investment bank. Morgan Stanley will have a first priority lien on AMR’s collateral, according to the order. Creditors have asked AMR to let them know if hedging exceeds 60 percent of fuel consumption."


From the same article.