AMR might need help

Hopeful

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Dec 21, 2002
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On The Cover/Top Stories
The British Are Coming!
Mark Tatge & Miriam Gottfried, 02.13.06




And so are the French, the Germans and the Dutch, to help save desperate U.S. carriers like American Airlines.
Could American Airlines soon be flying the Union Jack? It may take British Airways to rescue AMR Corp., the largest U.S. carrier, which lost $861 million on revenue of $20.7 billion in 2005 and will be marginally profitable this year, if it’s lucky.

Since 2001 AMR has lost $8.1 billion. Taking over the beleaguered airline three years ago, Chief Executive Gerard J. Arpey has gnawed costs to the bone, enlisting unions to help save $4.7 billion a year. Some expenses--like aviation fuel; crude oil was recently $68 a barrel--he can’t control. “We are not anticipating any relief in fuel prices in 2006,†says Arpey.

Still, help is on the way. U.S. and European Union regulators are warming to the idea of lifting restrictions on foreign ownership--potentially the most prodigious change since deregulation of fare pricing 28 years ago. Though foreign ownership is now capped at 25% of voting stock, the Bush Administration wants legislation to lift those barriers in order to bail out America’s troubled airlines. Takeovers might be a useful alternative to bankruptcy, where four of the six largest U.S. carriers have landed since 2001, jettisoning pension liabilities onto the federal government. Another piece of international deregulation would allow foreign airlines to fly between U.S. cities.

A British Airways-American merger would just be the beginning. Lifting restrictions on ownership and routes could bring a host of marriages (see box). Easy to see why: Traffic abroad is growing 8% a year, double the domestic growth rate, and passengers tend to be more willing to pay extra for amenities when they are crossing an ocean. European carriers, including giants like the recently combined AirFrance-KLM, want more access to U.S. markets as lucrative feeders to bigger global networks.

So why not get hitched? Arpey has tried about everything else. He vaporized American’s byzantine fare structure, eliminating Saturday night stays and cutting last-minute fares. He dumped moneylosing markets, added more seats to planes and did away with pillows and most of the free meals. To bump up sales, he started charging for curbside bag checking ($2), snacks ($3 to $5), frequent-flier upgrades ($25 to $250) and telephone and counter tickets ($10 to $15). But this added only $300 million to the top line last year.

American has been pushing abroad, in part to avoid murderous competition stateside from Southwest and JetBlue. Last year Arpey added flights to Mexico, the Caribbean, India, Japan and Ireland. Result: Revenue per seat-mile climbed 13.8% during the fourth quarter and 9.3% for the full year. International passengers now account for 35% of seat-miles, up from 29% in 2003. And there’s plenty of room to grow. “We have a lot of trend lines that are going in the right direction,†says Arpey. Asia, American’s biggest expansion area now, represents only 4% of AMR's available seat-miles.

As the second-largest carrier of international traffic after Lufthansa, BA (2005 revenue: $13.6 billion) is an ideal partner. It has access to markets in Asia, Africa and the Middle East. Many American passengers already fly the British carrier to cities AMR doesn’t service. The biggest plum (and pit) is London Heathrow Airport, where British Airways controls 40% of the traffic and shares gates with American. Once before, in 2002, U.S. and European antitrust regulators nixed BA and American plans to merge operations like ticketing and scheduling by insisting on their giving up 224 lucrative takeoff and landing slots at the London airport. Both airlines refused.

This time, however, BA’s attraction to AMR may supersede everything else. The Americas represent the Brits’ most profitable market--64% of BA’s earnings before interest and taxes, but only 37% of revenue. British Air Chief William Walsh, who worked his way up from pilot to chief executive at Aer Lingus, has made no secret of his plans for a closer alliance with American. He and Arpey reportedly met several times last year to discuss a deal. “I see Willie three or four times a year,†says Arpey. “I am not going to speculate about merging.†BA isn’t much more forthcoming. “Getting the law changed is our first priority,†says a spokesman there, adding that if the company goes shopping, it will shoot for the moon, not just 25% of the voting shares.

That’s only a slight sticking point. Even if the voting rules don’t change, the U.S. Department of Transportation will likely allow carriers like British Airways to gain management control. That would permit a sensible combination of marketing, scheduling, fares, fleets and baggage handling without fears of antitrust reprisal. Under that scenario the carriers would keep separate boards of directors and report operating results as two distinct companies. The changed rules might also lure foreign carriers to selected assets of Delta or Northwest, which remain in bankruptcy.

One other hitch. AMR may have escaped Chapter 11. But it's hardly in great shape, what with debt of $20 billion, $2 billion or so in annual debt service and negative equity of $1.3 billion. Citigroup analyst Andrew Light says it would cost $4 billion to recapitalize AMR's balance sheet. It also needs to spend $1.5 billion per year to replace its aging fleet. On the plus side, American has $4.3 billion in cash and a market cap of only $3.1 billion. Let the nuptials begin.
 
One other hitch. AMR may have escaped Chapter 11. But it's hardly in great shape, what with debt of $20 billion, $2 billion or so in annual debt service and negative equity of $1.3 billion. Citigroup analyst Andrew Light says it would cost $4 billion to recapitalize AMR's balance sheet. It also needs to spend $1.5 billion per year to replace its aging fleet. On the plus side, American has $4.3 billion in cash and a market cap of only $3.1 billion. Let the nuptials begin.

AMR could have an additional $70 million dollars, if they don't pay out the coporAAte greed! ;)
 
Try to put in perspective before you get an ulcer. I grant you that the timing of the bonusses could not be worse; however, $70 million is 1/3 of 1% of our total debt--.0035 percent. If your mortgage payment were $1000/mo, reducing the payment by .0035 percent would save you $3.50/mo.
 
Try to put in perspective before you get an ulcer. I grant you that the timing of the bonusses could not be worse; however, $70 million is 1/3 of 1% of our total debt--.0035 percent. If your mortgage payment were $1000/mo, reducing the payment by .0035 percent would save you $3.50/mo.
Well then giving me back my vacation, sick pay, and holidays should only increase the mortgage payment by about $3.50 a month. <_<
 
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Try to put in perspective before you get an ulcer. I grant you that the timing of the bonusses could not be worse; however, $70 million is 1/3 of 1% of our total debt--.0035 percent. If your mortgage payment were $1000/mo, reducing the payment by .0035 percent would save you $3.50/mo.


And the $70 million in bonuses is a drop in the bucket when compared to the $1.8 billion in concessions that were forced upon us under the threat of bankruptcy.
 
BA is a lot like LH -- they see themselves as being a lot more important to the world aviation market than they really are. AA has more departures (and probably RPM's) out of DFW every day than BA has worldwide.

In other words, I think AA could survive just fine without BA as a partner. With the other two largest US carriers already tied up as anchors of competing alliances, BA would have a lot harder time without AA as its US partner.
 
Try to put in perspective before you get an ulcer. I grant you that the timing of the bonusses could not be worse; however, $70 million is 1/3 of 1% of our total debt--.0035 percent. If your mortgage payment were $1000/mo, reducing the payment by .0035 percent would save you $3.50/mo.

JimAA,

Are you really an AA flight attendant? Are you really a union member? You speak like a true Kool-AAid driker and you should have worked for Delta. Do you honestly think it's fair for someone in mAAnagement to get a $1.7 million dollar payout, when AA is $20 billion in debt?

I know you're an old man and are close to probably calling it quits. The deal is; the majority of us are fighting hard to get back what we lost! Maybe you don't care about the future of this job but, some people do. You're in your second career and have already retired once, some of us are in our first and only careers and want to improve it. But, with people like you saying it's OK to pay out the corporAAte greed, we will never get it back!

Have you ever heard the term... UNITY PAYS? I think you should look it up and read about it.

My advice to you is quit and look for a non-union job.
 
Just wondering why this is showing in my post, I didn't write it?

Errrrr.... major moderator error. :blush: I blame it on the lack of coffee. I apologize for that mistake and to B.O.B. (or was it Hopeful?) I believe that those are his/her comments. For some reason I thought I saw the same quote by B.O.B. (or Hopeful) in two replies, so I merged them together. I'll try to split it back up, and if someone can claim the post below I will gladly give it back. :)
 
JimAA,

Are you really an AA flight attendant? Are you really a union member? You speak like a true Kool-AAid driker and you should have worked for Delta. Do you honestly think it's fair for someone in mAAnagement to get a $1.7 million dollar payout, when AA is $20 billion in debt?

I know you're an old man and are close to probably calling it quits. The deal is; the majority of us are fighting hard to get back what we lost! Maybe you don't care about the future of this job but, some people do. You're in your second career and have already retired once, some of us are in our first and only careers and want to improve it. But, with people like you saying it's OK to pay out the corporAAte greed, we will never get it back!

Have you ever heard the term... UNITY PAYS? I think you should look it up and read about it.

My advice to you is quit and look for a non-union job.


The Unions knew about this years ago. Why this is such a big suprise to everyone is beyond me.
 
Originally Posted and mistakenly merged by yours truly.

Try to put in perspective before you get an ulcer. I grant you that the timing of the bonusses could not be worse; however, $70 million is 1/3 of 1% of our total debt--.0035 percent. If your mortgage payment were $1000/mo, reducing the payment by .0035 percent would save you $3.50/mo.

No ulcer; just stating the facts!

FYI... layoff the Kool-AAid!
 
Have you ever heard the term... UNITY PAYS? I think you should look it up and read about it.

Oh? You mean that precious unity where you "senior" f/as were more than happy to throw us junior flight attendants under the bus without even furlough pay? I read all about that.

And, don't give me the cr*p about you had nothing to do with it. Not one of you stood up and said this is wrong. And, I don't want to hear the lie about how you were all just trying to save the job so that there would be something for us to come back to when we were recalled. All I hear from the senior f/as is what a terrible job this is now and not worth it.

Actually, I love my job and I'm good at it. But, I am a realist. The job pays what it pays. The job has the benefits it has. And, no amount of b*tching about how it used to be is going to get back one dime of what your so-called Unity gave up. You will NEVER get it back.

You don't have a union. You just have a group on Useless Boulevard who have taken vows in the Order of the Perpetually Trip Removed. As long as they don't have to work on airplanes that have passengers on them, they think everything is just fine. Did you notice the request in the hotline for somebody--anybody--to submit their name for the place 5 Ad-Hoc Executive Committee position? With almost 19,000 "active" members, they got exactly zero Willingness to Serve notifications from the membership. Yeah, a real union and a passionate membership. You're such a union firebrand, why didn't you submit your name?

And, I will stay until I am ready to leave.
 
Errrrr.... major moderator error. :blush: I blame it on the lack of coffee. I apologize for that mistake and to B.O.B. I believe that those are his/her comments. For some reason I thought I saw the same quote by B.O.B. in two replies, so I merged them together. I'll try to split it back up.
No problem, just wondering what happened. <_<
 
You don't have a union. You just have a group on Useless Boulevard who have taken vows in the Order of the Perpetually Trip Removed. As long as they don't have to work on airplanes that have passengers on them, they think everything is just fine.

I meant to add that the only difference between the JW group and the THB group is the names.

Perfect example of how much AApfa gives a flip about junior f/as...

Frontier and SWA f/as,regardless of seniority, can now fly free in coach on AA. Those of us who are AA f/as with less than 5 years still have to pay service charges for occupying a coach seat. I tried to get THB to address the issue. Her response was..."Well, after all it is company policy." End of discussion.

And, I don't want to hear the company argument that they are just trying to recoup some of their costs. How many employees do you think are left at AA that have less than 5 years? Outside of RES and Flight Service, I would be willing to bet not many. In fact, I would guess that out of approx. 70,000 active employees there are less than 2,000 of us in that category.
 

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