AMR Execs $13.4m vs. SWA Execs $5.3m in 2008

[eolesen]

Pretty certain that FWAAA was making the GAAP references some time ago.

Funny how you mention how paying off the debt was a misplaced priority, but don't recognize *why* AMR was in debt.

When you look at profits in 1994-2000, you can't overlook the $800M in losses they had during 1990-1993....

	Loss/Profit	Cumulative
1982	20		-20
1983		228	208
1984		234	442
1985		345	787
1986		279	1066
1987		198	1264
1988		477	1741
1989		455	2196
1990	40		2156
1991	240		1916
1992	475		1441
1993	110		1331
1994		228	1559
1995		162	1721
1996		1016	2737
1997		985	3722
1998		1314	5036
1999		985	6021
2000		813	6834
2001	1762		5072
2002	2523		2549
2003	1228		1321
2004	761		560
2005	861		-301
2006		231	-70
2007		504	434
2008	2,071.00	-1637

In short... AMR has lost almost $9B since 2001, and dug itself into debt when expenses were outpacing revenues. Whether that was due to new airplanes, facilities, or labor contracts, the fact is that they took on debt to pay suppliers, landlords and employees.

Sure, when you come into a little money, it's really easy to simply carve up the pie and give it to the employees, but it doesn't erase the fact that you had to borrow money to survive for a couple years.

Not paying down debt is the type of irresponsible behavior that drove Fanny Mae and Freddie Mac into the ground, and destroyed the mortgage & banking industry and crashed the housing market.

If you're not a believer in living on borrowed money, why would you think it's OK for a company to survive on borrowed money?....

 

[The Goose]

Now Eric, that's not exactly what I said - why you office boys insist on making something sound like what it isn't is beyond me, that is, unless it's the only way you're able to make an argument.

We are well aware that AMR has lost money - my comment involved the little trick of accounting where debt can be paid with earned money and not appear to be income - nothing more. Someone addressed that a few months ago but I can't remember who.

 

[FWAAA]

Now Eric, that's not exactly what I said - why you office boys insist on making something sound like what it isn't is beyond me, that is, unless it's the only way you're able to make an argument.

We are well aware that AMR has lost money - my comment involved the little trick of accounting where debt can be paid with earned money and not appear to be income - nothing more. Someone addressed that a few months ago but I can't remember who.

Maybe this is what you're thinking of:

Debt is paid with cash, and cash doesn't necessarily mean revenue or net income.

AMR has sold about $2 billion worth of new stock since May, 2003 and has sold nearly $2 billion of assets (burned furniture) such as its stakes in Hotwire, Orbitz, ARINC and American Beacon Advisors. That may not be a complete list, but you get the idea. That's $4 billion of cash. For the stock sales, the company doesn't recognize revenue or gain (thus, no income). For the asset sales, some of the price was gain and caused income (which offset some of the losses).

No real accounting tricks here. Just various means of raising cash with which to pay down debt. And with which to contribute over $2 billion to the pension funds since 2002.

AMR has been cash flow positive since the concessions were imposed, and that's because, in part, to the non-cash writeoffs like depreciation and amortization which reduce income but don't require current cash outlay (the cash for those items was spent years ago on capital assets like airplanes, route authorities and slots).

From 2003 until about 2007, AMR built up its cash balance from about $1.2 billion to about $6 billion. Where did AMR get all that cash despite lackluster financial results? The above $4 billion of stock sales and asset sales, plus the positive operating cash flow. Hope that helps.

 

[The Goose]

Maybe this is what you're thinking of:

Debt is paid with cash, and cash doesn't necessarily mean revenue or net income.

AMR has sold about $2 billion worth of new stock since May, 2003 and has sold nearly $2 billion of assets (burned furniture) such as its stakes in Hotwire, Orbitz, ARINC and American Beacon Advisors. That may not be a complete list, but you get the idea. That's $4 billion of cash. For the stock sales, the company doesn't recognize revenue or gain (thus, no income). For the asset sales, some of the price was gain and caused income (which offset some of the losses).

No real accounting tricks here. Just various means of raising cash with which to pay down debt. And with which to contribute over $2 billion to the pension funds since 2002.

AMR has been cash flow positive since the concessions were imposed, and that's because, in part, to the non-cash writeoffs like depreciation and amortization which reduce income but don't require current cash outlay (the cash for those items was spent years ago on capital assets like airplanes, route authorities and slots).

From 2003 until about 2007, AMR built up its cash balance from about $1.2 billion to about $6 billion. Where did AMR get all that cash despite lackluster financial results? The above $4 billion of stock sales and asset sales, plus the positive operating cash flow. Hope that helps.

That's what I was trying to remember - thanks.

 

[Bob Owens]

Funny how you mention how paying off the debt was a misplaced priority, but don't recognize *why* AMR was in debt.

Not paying down debt is the type of irresponsible behavior that drove Fanny Mae and Freddie Mac into the ground, and destroyed the mortgage & banking industry and crashed the housing market.

If you're not a believer in living on borrowed money, why would you think it's OK for a company to survive on borrowed money?....

Has there ever been a period when this company(or most other large corporations) didnt carry any debt? The fact is as long as they can service the debt then its not really that much of a problem, in fact its one of the ways that the banking industry gets to suck all the profits from industries that actually produce products and prevent workers from getting the fruits of their labor.

 

[eolesen]

Some debt, yes. But debt exceeding 50% of revenues?.... AMR was carrying upward of 75% at one point.

 

[Bob Owens]

Some debt, yes. But debt exceeding 50% of revenues?.... AMR was carrying upward of 75% at one point.

What point was that?

 

[eolesen]

Uh, let's see, Bob....... does $15B+ of debt on about $20B of revenues ring a bell?....

 

[FWAAA]

What point was that?

On 12/31/02, AMR's total debt was over $22 billion and 2002 total AMR revenues were $17.3 billion. That year, debt was more than 100% of revenue. Not a healthy position for anyone to be in. And no, that debt number does not include future rent or lease payments (as you mistakenly concluded in the other thread).

 

[eolesen]

But it's all just a shell game, right? There wasn't really that much debt. Really. It was just a ploy.

 

[Hopeful]

But it's all just a shell game, right? There wasn't really that much debt. Really. It was just a ploy.

Bring on bankruptcy then and stop demanding workers take more concessions.
Bring it on.....I would love a bankruptcy under the Obama administration....You can bet that the workers are the not only ones who are gonna bear the brunt under chapter 11.......The executives are gonna pay the price too.

After all, if a bankruptcy judge can abrogate labor agreements, they sure as hell can toss out the greedy "iron clad" executive contracts.

Bring it on if AMR is such dire straits.

 

[Bob Owens]

On 12/31/02, AMR's total debt was over $22 billion and 2002 total AMR revenues were $17.3 billion. That year, debt was more than 100% of revenue. Not a healthy position for anyone to be in. And no, that debt number does not include future rent or lease payments (as you mistakenly concluded in the other thread).

How about interest payments?

 

[eolesen]

Be careful what you wish for, Hopeful. Better yet, go talk to the UAW guys at Chrysler and see how excited they are now that they're really in Chapter 11....

 

[The Goose]

Bring on bankruptcy then and stop demanding workers take more concessions.
Bring it on.....I would love a bankruptcy under the Obama administration....You can bet that the workers are the not only ones who are gonna bear the brunt under chapter 11.......The executives are gonna pay the price too.

After all, if a bankruptcy judge can abrogate labor agreements, they sure as hell can toss out the greedy "iron clad" executive contracts.

Bring it on if AMR is such dire straits.

It's rather doubtful AMR will ever do a Chapter 11 filing with the present frat-bratz in Centerpork, not to mention the BOD we're stuck with. They all know very well a filing would mark the end of their gravy-train.

Eolsen is correct, however - the workers have gotten hosed in the past. His experience, however, is based on pre-2005 laws. Nobody knows how the post-2005 version will be applied but evidently, it's bad enough for the executives that there have been few large corporate filings since the change. As you might recall, Delta and NWA filed to get under the wire in order to do a merger later, though they couldn't say so at the time as there would have been a few execs go to jail over that deal - that would have been quite illegal.

I'm not interested in being a test case - I'd much rather another airline be the guinea pig, but I don't have the fear of it as I once did.

 

[The Goose]

Be careful what you wish for, Hopeful. Better yet, go talk to the UAW guys at Chrysler and see how excited they are now that they're really in Chapter 11....

Different industry, different labor rules Eric - you know that. Quit with the misrepresentations already.

You Republicans are still angry of losing the gravy train BushCo handed you for eight years. Now that the tables are turned your ilk are more than a bit miffed. My heart bleeds purple panther *#%^ for you.

It would appear, however, that Rupert Murdoch is soliciting comments from the far right and Republican (please note: I did not say conservative) factions of the WSJ - perhaps he can help you out.