AMR Fights To Quell Bankruptcy Fears

[chucky]

AMR Fights to Quell Bankruptcy Fears03/31/08 - 03:00 PM EDT

by Ted Reed

CHARLOTTE, N.C. -- American Airlines, the largest U.S. carrier, holds nearly $5 billion in cash, recently posted impressive quarterly unit revenue growth and in 2007 paid down $2.3 billion in debt. Even so, Wall Street seems to think that American Airlines parent AMR(AMR - Cramer's Take - Stockpickr) is a company in trouble, with a potential bankruptcy looming.

And shares, which traded Monday around $8.50, are scraping along near a three-year low. Market capitalization is just 10 cents to the revenue dollar, says FTN Midwest Securities analyst Mike Derchin, who adds: "A lot of investors see serious liquidity issues because they are skeptical about the revenue outlook in a recession." Standard & Poor's last week downgraded AMR's outlook to negative from positive, cutting short-term ratings to B-3 from B-2.

AMR's treasurer, Beverly Goulet, addressed the bankruptcy talk two weeks ago at the JPMorgan Aviation and Transportation conference and more recently in an interview with TheStreet.com.

story

 

[luv2fly]

Beat you by a minute chuck.

 

[Hopeful]

Of course....it's CONTRACT negotiation time....

But fear not,, the executives are still gonna get their PUPs

 

[chucky]

Beat you by a minute chuck.

sorry Luv2fly, I'll check b4 I post next time

 

[flyhigh]

...sad how Wall Street thinks today. As the spokesperson says:
Says Goulet, "We restructured the company the right way: We've paid our debt, funded our pension plans, funded obligation to creditors, our employees are highest paid in the industry, and our equity didn't become worthless. That's what we are paid to do."

You avoid wiping investors out and you do so while keeping relative pace with key competitors (UA specifically) yet you still get beat up.

 

[Boomer]

Requirements:

1) Suitable Sect. 1113 Letters attached to each and every article for all Unions on the property.

2) EETC, Tranche "A", securitizing all future promises made in labor contracts.

Discussion:

1) Suitable Sect. 1113 letters allows challenge during the bankruptcy process and hearings on the relative merits of the language versus the conditions of the time.

2) EETC, Tranche "A", securitization balances the economic promises of the CBA against the duration the CBA exists until a successor contract is ratified while encumbering cash against "takeovers" or bankruptcy: Labors' Poison Pill.

3) The EETC, Tranche "A", securitization has been tested by both US Airways and UAL during bankruptcy and held inviolate. Thus far, it is one of the only/few debt instruments that survives challenge. From what I've read, there shouldbe no problem in structuring the EETC so that interest income from the EETC can be designated to funding of the defined benefit pension plAAn.

4) The delivery of 23 737-800's during 2009, while AMR is holding +6B in cash, creates a "knuckle" in the water we can use for cover while events develop around us.

 

[LGA Fleet Service]

Bankruptcy? First I've heard of it....of course a firm like FTN Midwest Securities is known for having their ear to the ground...

Were the company going to file chapter 11 I don't see them paying down $2.5 billion in debt last year, as well as keeping the pension 96% funded.

If they were going to file, that would be the equivalent of throwing money out the window of a moving car.


Not to mention this: ...Meanwhile, strong first-quarter revenue per available seat mile growth between 6.9% and 7.9% indicates that American has the ability to recoup some of its fuel cost increase.

 

[Boomer]

What part of Executives Get Paid, Workers get "Laid" don't you understand?

There has been no BK Filing during which a Major AirCarrier was denied Executive Compensation.

If the deal on the table requires a BK filing for completion, and the payoff for those responsibled for ratification of that deal are compensated to a pre-agreed measure; why not?

After all, court documents describe an argument that would indicate the purchase of TWA by AMR was predicated on just such an event.

IMHO, Never fight the flow of funds.

Like electricity: the meeting of high potential with low potential results in current flow.

 

[Bob Owens]

Not to mention this: ...Meanwhile, strong first-quarter revenue per available seat mile growth between 6.9% and 7.9% indicates that American has the ability to recoup some of its fuel cost increase.

Conley was hoping you wouldnt see that.

Says Goulet, "We restructured the company the right way: We've paid our debt, funded our pension plans, funded obligation to creditors, our employees are highest paid in the industry, and our equity didn't become worthless. That's what we are paid to do."

I guess she was talking about management.

 

[eolesen]

What part of Executives Get Paid, Workers get "Laid" don't you understand?

There has been no BK Filing during which a Major AirCarrier was denied Executive Compensation.

True to date, but the changes in the bankruptcy law passed in 2005 also changed the playing field as far as retention bonuses go. Some of the hurdles for a retention bonus include proof that there's a competing offer for the employee; otherwise, it has to conform to standards and limits that can't exceed 10 times the amount paid to other employees. In the cases where "KERP's" (Key Employee Retention Program) have been approved by the court, the standards and targets were such that simply showing up to work wouldn't trigger a payout. You actually had to do something. AA's current stock price scheme wouldn't pass muster from what I've seen.

The new law has already been tested and bonuses denied to a few non-airline bankruptcies.

 

[Hopeful]

True to date, but the changes in the bankruptcy law passed in 2005 also changed the playing field as far as retention bonuses go. Some of the hurdles for a retention bonus include proof that there's a competing offer for the employee; otherwise, it has to conform to standards and limits that can't exceed 10 times the amount paid to other employees. In the cases where "KERP's" (Key Employee Retention Program) have been approved by the court, the standards and targets were such that simply showing up to work wouldn't trigger a payout. You actually had to do something. AA's current stock price scheme wouldn't pass muster from what I've seen.

The new law has already been tested and bonuses denied to a few non-airline bankruptcies.

AWWWWWW...ONLY 10 TIMES AMOUNT PAID TO OTHER EMPLOYEES? IS THAT ALL?

AWWW, SNIFFLE SNIFFLE

 

[eolesen]

Hey, it's a start... If the average salary at AMR winds up being about 60K, that means bonuses can't exceed 600K. Seems fairer than the previous system.

Compare that to the tens of millions earned by execs at UAL and NWA for doing nothing other than exiting bankruptcy...

 

[Bob Owens]

Hey, it's a start... If the average salary at AMR winds up being about 60K, that means bonuses can't exceed 600K. Seems fairer than the previous system.

Compare that to the tens of millions earned by execs at UAL and NWA for doing nothing other than exiting bankruptcy...

So they take it as salary instead of a bonus. Big deal.

 

[Hopeful]

Hey, it's a start... If the average salary at AMR winds up being about 60K, that means bonuses can't exceed 600K. Seems fairer than the previous system.

Compare that to the tens of millions earned by execs at UAL and NWA for doing nothing other than exiting bankruptcy...

How about this novel idea? NO INCREASE IN PAY AND BENEFITS FOR EXECUTIVES WHEN THEY ASK A JUDGE TO SLASH PAY AND BENEFITS FOR THE EMPLOYEES...

And please spare me the "need to retain the key talent."

 

[flyhigh]

Evidence would suggest that you probably save money that way. Look at what it took to get Tilton away from the oil business to be TOTALLY useless at UAL. He can't even make the shareholders and other big money folks happy. Arpey probably has AMR is the perfect position. If they file bankruptcy and wipe out debt, there's no chance that forgiving debt will result in a future payoff as UAL/DAL/NWA creditors expected.

This bankruptcy talk is as amazing as AMR's spokesperson makes it sound...a few weeks ago these same people said AMR had too much cash and it was a bad thing, now it's not enough. Yes oil has gone up and the economy is going bad but we've been saying that about the airline economy for 6 months at least.