Another US red flag?

[johnny kat]

777/Love,

Your points are all well made and valid. But I have to mostly agree with WT. But, It has yet to be seen if a stand alone AA will be better than a merged AA.

The question that always comes to my mind is "How will AA make up the revenue difference (roughly 14 billion est.) between itself and the 2 mega carriers? My only interest in seeing a merger with AA is to make up my own revenue disadvantage (salary). With that said, US is the only candidate that passes the "revenue and be quick about it test" that may provide the best opportunity to get AA up to network revenue status that DL and UA have now. Just how long will it take a stand alone AA to reach revenue status with the megas? And would it be quicker and fraught with less risk to be stand alone or merged, Who's to say?... I quess it boils down to who is the better snake oil salesman.

If AA remains stand alone it might not ever be what the employees would like to see. If AA and US merge there will surely be a ton of issues worked through, but as anyone at US can tell you, issues will just have to be dealt with and then move on to the next one. To think that a merger would be any less or any more difficult than what the other two have pulled off..who knows. That's what management is tasked with doing.

Welcome home.

 

[ChockJockey]

can you give us some historical perspective - any would do - that shows that labor situations at two separate companies have been improved after a merger?

No. It's not a feature of my life to be obsessively aware of the history of every airline merger. Can you show a situation in which labor relations were and labor itself has done so poorly for so long at each carrier before a merger? Who is coming out ahead in the status quo? Management at US and management at AA looks like. If at the end of the day a merger is the most dollarwise course of action for the powers that be the counterpart workgroups will have to coordinate in whatever ways necessary to maximize leverage and get as much scope protection as possible. They need to prove their commitment to making any new AA compete as a world class airline by investing in the terms of their work agreements with their most important assets on which any merger succeeds or fails.

Regardless of whether or not the merger is a good idea, if that's the situation we're placed in then that's what we have to prepare for. If anyone has any serious complaints about their treatment, compensation, or work environment at either carrier the merger is going to be the next best opportunity to actually do something about it, assuming we don't totally squander it in a self-fulfilling prophecy. I realize I might be setting myself up for disappointment but it's a far less miserable attitude to have than expecting prolonged failure and bitterness.

 

[signals]

Quotes the sandflea from the sandcastle. He's US management.

 

[delldude]

Quotes the sandflea from the sandcastle. He's US management.

Yeah, they were good for that crap during our ass kickings at U.
Many teared up and bought the manna from heaven. remember the twice voted contract?

 

[WorldTraveler]

throwing another log on the fire.....

a transportation "expert" (since we all are) blasts US for focusing on short-term profit improvements at the expense of long-term investment in their airline including growing US' international network in Latin America and Asia, the fastest growing and most profitable parts of US carriers. He also says that US won't help AA.

"I'm not criticizing Doug Parker or his team," Gellman said. "But they have to live with what they've done today for many tomorrows if they don't pay attention."

http://www.thestreet.com/story/11779680/1/us-airways-merger-wouldnt-help-amr-transportation-expert-says.html

 

[Bob Owens]

That's part of the problem today. If you do a little research you will find that the great majority of medical facilities--hospitals, specifically--are incorporated as non-profit institutions. It's one of the reasons that it is so very puzzling that medical costs have increased many multiples of the cost of living increase over the past 10-20 years.

Though I know part of the problem today is what you might call hospital administrator and physician ego. For instance, in Houston 20 years ago which even then had one of the world's largest medical centers, if you needed a thalium stress test, your doctor had to refer you to Texas Heart Institute for the actual test because they were the only facility in Houston that had the machine. The suckers cost over $1 million each. Within 5 years there were cardiologists in Houston that had one in their office and small general care hospitals in the suburbs that were adding wings just so they could have one on premises. (The suckers are also big. You can't just move a patient bed out of a room and install one. ) You and I are paying through the nose that we don't have to drive across town to get a highly specialized test--even if we are willing to drive the distance. The doctor/hospital don't want to share the profit from that test with anyone across town.

I dont mind Doctors making money. They should live as well as CEOs of companies, they worked for it. The CEOs howver are grossly overpaid, especially the CEOs of Insurance Companies.They are the ones making money off illness. If a Doctor has to pay a million a year for malpractice insurance he has to get it from his patients, who are paying thousands of dollars a year to be insured as well.

 

[AAviator]

Are you that hung up on what my response to you may be? I am able to put all of this BS out of my mind in favor of enjoying the holiday with family, unlike many others. I have come to the conclusion that there will always be differing opinions on here, and I'm not going to consume my life on things that I nor you for that matter have any control over. When Horton or Parker come knocking on your door asking what you want them to do, please let us all know.

There's substance for you...

The turkey defense.. I've heard it all now!

 

[WorldTraveler]

I dont mind Doctors making money. They should live as well as CEOs of companies, they worked for it. The CEOs howver are grossly overpaid, especially the CEOs of Insurance Companies.They are the ones making money off illness. If a Doctor has to pay a million a year for malpractice insurance he has to get it from his patients, who are paying thousands of dollars a year to be insured as well.

it is lawyers who are making money off of malpractice, not CEOs.

Execs in the health care sector are no different than those in any other sector of business... and they are all enemies to you. But that doesn't change the fact that they did invest in a career and participated in the labor market in areas where they could command premium salaries. They largely work for stockholders who are willing to pay them those salaries.
despite the efforts of a few stockholder rights groups, executive salaries have not changed much which says they do not represent the interest of the majority of stockholders.

Specific to AA, employees could have bought the company shortly before it went into BK for less than $10K per employee. There would still have to have been cuts but you wouldn't be watching hundreds of millions of employee cost cuts be used to fund executive bonuses for getting the company thru BK.
And BTW, most analysts believe AA has done a fairly good job so far of navigating the company thru BK....

Whether you agree or not, that is the opinion of the people who will help make the decisions about the viability or not of AA post BK

 

[jimntx]

I dont mind Doctors making money. They should live as well as CEOs of companies, they worked for it.

Nor do I, but just as one of the airline industry problems is overcapacity--too many seats chasing too few butts--there is no need for a wildly expensive piece of medical equipment to be available in more locations than a loaf of bread. If every cardiologist in town has a machine that costs over $1 million, you and I pay the price for all those inflated monthly payments. There was a time when doctors, hospitals and other caregivers combined forces to make sure that expensive machines were located in a centralized place in the city, and everyone used the same machines. If you needed a thalium stress test, you had to go to that specialized clinic instead of to the nearest Starbucks.

 

[AAviator]

AAviator,

I'll respond to your posting.

Thanks for your reply

I am not trying to be contrary to the spector of a profitable well ran stand alone AA. I am simply going to ask "How long will it take AA to produce the extra 14 billion in revenue to let it compete with DL and UA?"

I wish the pro merger folks would quit using a "scotch tape" revenue arguement. Its not a race for total revenue. It never was, and it never will be. You might be surprised by this, but did you know that Delta in 2011, made almost 50% (~44%) of its mainline revenue from international flying? Revenue will come from having the total network (product) that serves the need of the consumer (dollars). When those dollars come to the market, they will flow to the product that best suits their needs. In the case of the business traveler, we all know how this works. We also know how important the business traveler is to the full service network airlines. We also know, (yet some refuse to acknowledge) where these travelers reside and do most of their business.

Build the complete, most comprehensive network, and you stand the best chance of capturing the revenue. "Scotch taping" LCC's revenue to AA's looks good at first glance, but lacks durability without a comprehensive "competitive network".

AA may be somewhat successful in the short term with lower costs. But as time goes by, as the other two mega carriers and a well ran profitable plethora of smaller airlines, including US, deliver their competitive response to the new AA it seems like the odds of AA turning the airline world on its head become greater.

You have that backwards. A merged AA/LCC, does nothing to ease AA's disadvantage in the Pacific. Zip.. nada..
LCC is in a lot of markets, successfully, due to low, low labor costs, and those markets generate revenue. How many of those markets become unprofitable when you overlay industry standard labor rates? How durable is the PHX hub with industry standard labor costs? I bet it will be reduced to a focus city within three years. LCC is the one who is screwed here absent a merger, and Parker knows this.


Doesn't AA have anti trust immunity with JAL and IAG? AA metal will not be flying the far flung reaches of the planet because that will be done by the partners. The only time I ever see AA crews in Europe is in London and a smathering of a few other cities. Your crews constantly complain about only overnighting in London as you are nothing more than the trans atlantic commuter airline for BA/Iberia.

Answered very well by FWAAA (thanks). We have more seats a day to London than you guys have to Europe. With 47 777's on the property, 13 773's, and 5 more 772's coming for sure with deliveries starting any day.. 58 767-300's and 18 757's set up for ETOPS, and orders/options for 100 787's I think your pity of our international ops is a bit misplaced. I could care less about what those crews you run into complain about. When was the lat time you went to Shanghai or Santiago Chile for work?

AA's transpacific flying is only the Tokyo version. So AA is king of the south american route for the time being. With all due respect I just don't see how a four corner strategy out of hub cities already saturated with competition and a big gaping hole in your US east coast route map is going to help you generate the 14 billion that would put AA on par with the revenue of DL and UA.

Par what? Revenue? Scotch tape anyone? That gaping hole has a number of ways of being addressed. And obviously the most convenient for you would be to merge with LCC. You know, that hole you're looking at is in NYC. And we all know how much LCC helps there.... PHL and JFK compete with each other internationally. They are not complementary in that regard.

Those new airbus a/c had better arrive with a quickness and had better be booked to capacity on every single flight out of the same four hubs or AA will be headed right back into BK at some point.

<Chuckle> How does a merger with LCC help us where we're weakest? Does that RIC-JAX passenger we'll maybe capture have deep enough pockets to counter the money the RIC-Warsaw, or the RIC-TPE will be forking over to Delta or UAL? Right back into BK? Really? I guess we'd better do a deal quick!

Airbus 319 deliveries start in 7 months, 3/month,.. 4 in Sept.. 321's start in November. 130 firm orders. Another 130 firm orders for the NEO versions.. A/C ordered in total:557 with 523 options. Tons of entry level wage new hires will be required. First bases will be DFW and MIA.. There will be some new destinations announced shortly in Latin America much to WT's dismay..



I know you have a great disdain for US but our future is quite bright even without AA.


Not true. I don't see the benefit/cure all that you all see. Just how bright is your future absent a merger. Lets switch gears here a bit... Share your take on where LCC will be 5 years from now.. If AA is doomed being in and trying to make a go of it in the top US markets, how will LCC fare being essentially locked out of the rest of the global economy from a network perspective? How will that be accomplished with market rate compensation? (not a snow balls chance in hell)

I don't hold any disdain for US. I find the widely held belief that AA will get a big boost from LCC laughable at best. None of you have stepped up and explained how LCC begins to fix AA's problems without bringing up the scotch tape theory. Loss of Star revenue, UA codeshare revenue, unprofitable market revenue loss when indusrty rates are applied... Likely DOJ required DCA divestiture(s), PHL/JFK INTL. rationalization revenue loss.. Integration costs.. I see 32,000 new employees where only about 20,000 are needed... And thats not to be meant as anything personal...


I don't understand why you are so hell bent on seeing AA go through the BK process and come out of it with a doomed plan of having a revenue disadvantage, but yet offering all of the same costly ammenities of the mega carriers.


Again, I think you have that backwards. A solid comprehensive network will generate superior returns. A merger with LCC will still require organic growth to create a network that is competitive with UAL/DAL. AA has the aircraft needed on order, and new hire (lowest cost) employees at the door.

Network, not tape. You are talking in circles.

In other words trying to keep up with Joneses without having the resources to do so. The new standalone AA will still be unable to connect most of the east coast customers with the ease of US, DL or UA because it lacks the southeast mid atlantic.

Yup. Using that logic, why hasn't Parker snatched up Frontier? How does LCC capture that MKE-SMF traffic? How does Delta connect the Denver-McAllen Tx. traffic? You can't be absolutely everything to everyone. I think the costs and the risk associated with adding LCC to the mix just to accomplish what you think we need are too high.

AA management has probably screwed the pooch sufficiently for us to end up in a merger.. I give it a better than 50-50 chance. I think it will be ugly.

Whatever happens I wish you much success and a Happy Turkey Day. Let's eat.

And the same to you.

 

[Bob Owens]

it is lawyers who are making money off of malpractice, not CEOs.

Malpractice suits, and the fear of them, allow them to rape the Doctors.

Execs in the health care sector are no different than those in any other sector of business... and they are all enemies to you. But that doesn't change the fact that they did invest in a career and participated in the labor market in areas where they could command premium salaries. They largely work for stockholders who are willing to pay them those salaries.
despite the efforts of a few stockholder rights groups, executive salaries have not changed much which says they do not represent the interest of the majority of stockholders.

http://www.forbes.co...-pay-chart.html

Majority of stockholders or the holders of the majority of stock? Can 10000 shareholders that each own one share outvote one shareholder with 100,000 shares?

Your claim is simplistic and deceptive. Who makes the decisions on executive pay, in the real world? I own AA stock, I was never asked how much Horton should get paid. For the most part executives determine what executives get paid, and they all have an incentive in seeing that pay go up.

I also have money in a 401K plan, but I can only put that money into funds, funds that own stocks, but even though in theory that makes me a shareholder in all those companies I never get a ballot, I dont even get to pick which stocks are in those funds, so instead some executive who runs the Fund gets to vote with the millions of shares that are bought with the money from the funds that comes from people like me, so please forget about trying to spin this to make it seem democratic. Its rigged and everybody knows it, even you. You just think you are so smart you can BS anybody.

 

[Bob Owens]

AA has the aircraft needed on order, and new hire (lowest cost) employees at the door.

At the door? Which one the "In" door or the "OUT" door? Do you really think AA has people waiting at the door to work for them? They were having a hard time filling mechanics spots before the bankruptcy, we had dozen quit in the middle of it. The MTA is running ads and what they have to offer blows away what AA is offering, we have 20 year guys quitting and going there.

AA is done.

Any new hires they get will leave before they become proficient. Why would a new hire stay at AA?

 

[AAviator]

At the door? Which one the "In" door or the "OUT" door? Do you really think AA has people waiting at the door to work for them? They were having a hard time filling mechanics spots before the bankruptcy, we had dozen quit in the middle of it. The MTA is running ads and what they have to offer blows away what AA is offering, we have 20 year guys quitting and going there.

AA is done.

Any new hires they get will leave before they become proficient. Why would a new hire stay at AA?

The flight attendant application door closed in 4 days.. Over 100K applications for 1500 openings. Pilot applicants will be plentiful. The entry level jobs will be tougher to fill over time, but supply and demand will prevail.

Can't talk to what the MX picture will look like over time, but the market will dictate what the job pays. Why hasn't everyone left Bob? As soon as it affects the operation, AA will be forced to act to attract and retain AMT's You know that.

 

[WorldTraveler]

Bob,
you most certainly do have the right to vote even in mutual funds. If you never receive ballots, then you need to see who is intercepting your mail because there are precious few mutual funds that do not give you the right to vote in anything.

Of course the people who own the most stock get the most votes... you apparently want to have the freedom to dictate the terms of the way companies operate w/o having invested more than a minimum in those companies.

You DO have the option to dictate the control of AA through its stock - but it will require the participation of a whole lot of other people. AA employees COULD HAVE taken control of the company many times but they have never been able to focus their attention on working together and thus the company has been able to determine how things will play out.

The simple reason why there have been so many fewer mechanics trained in the US is because airlines are outsourcing and the demand for mechanics has shrunk. You continue to think that the situation WRT mechanics that exists in the US today exists in other countries and it clearly does not.

AA clearly has maintenance needs and I agree with you that they probably will face a shortage of qualified mechanics based on their level of outsourcing and their pay rates, but the market will correct the overall problem.

You consistently demonstrate that you cannot or do not want to understand the big picture beyond what affects you and your situation.

Aviation,
good post and I agree w/ most of it.
The main differences that have to be noted is that
1. AA's revenues in NYC continue to shrink... where they were once #1, they are now a good ways behind UA and DL. In every other competitive market in the US, the #3 carrier has never been able to remain in the position AA is in now. The chances are very high that AA will shrink much smaller in NYC if it does not merge w/ someone that can take it to a competitive position. Even if AA merges w/ B6, AA will not gain sufficient mass at LGA or EWR to be able to compete with DL and UA in the short haul market. JFK is the #3 of the 3 airports in short haul traffic; AA is #3 among AA, DL, and UA in short haul, business traffic from NYC and there is no conceivable strategy for that to be fixed.
Thus the prospect of having a NE hub in PHL where US does have a large enough position might well be strategically necessary.

2. AA is nowhere near the size in Asia as it needs to be to compete with DL and UA, and again there is no example of a #3 carrier remaining viable in a competitive market. AA has stabilized its presence outside of NRT of late but it still is supporting JFK-HND which is losing boatloads of money and which they indicated they would like to move but which was denied.
Even with the improvement that AA has seen, except for DFW-NRT and to HND, AA competes with UA on every transpacific route and UA outperforms AA on revenue in every one of them. It is far from certain that AA's venture into ICN will be successful given that they are going up against KE which has deep pockets and is established in the market.

3. AA also has the smallest presence in continental Europe and alot of that is tied to IB which is going thru a dramatic restructuring. US does add more in continental Europe, but again the two combined would be #3 in continental Europe.

4. Latin America does remain AA's brightest spot - but it is the smallest of the global regions from the US. Further, AA's success in Latin America is highly related to the fact that AA has a lock on MIA which other US carriers cannot even enter because of restrictive treaties between the US and countries in Latin America. Those treaties will fall in the next couple years and it is a given that there will be one or more US carriers that will add MIA-Latin America service. While MIA is the largest Latin America destination, AA will lose its biggest advantage in the region and other carriers do not have to be anywhere near the size of AA at MIA in order to pull corporate revenue away from AA. You need only look at LHR to see that AA gave up a huge amount of market share when LHR opened to other carriers, and LHR is still limited by high priced slots that limit the ability of other US carriers to grow.
Other carriers do compete very successfully with AA outside of MIA.
Further, foreign carriers that are not allied with AA are aggressively adding service to MIA as well as overflying MIA to some of the top destinations.

AA still probably has a very good chance of restructuring on its own... but it is a gross error to think that AA can solve all of its network and strategic problems or that US can't be of some help, even if the combination will still not be large enough to compete with DL and UA.

 

[Bob Owens]

100,000 ? Well that's what they claim. Funny how thats the same number that Delta put out, could use a little more imagination. And anybody can fill out an application, some people have to fill them out if they want to keep getting checks from the state. I remember people like you saying they had all these applications for mechanics, they raised the starting wage to the third step yet they still weren't getting qualified people. Spots went un-filled. They got 9 people out of the hundreds riffed to come to New York so far. http://abcnews.go.com/Travel/delta-air-lines-hiring-1000-flight-attendants-international/t/story?id=12279939