Boyd Group's review and analysis of AA's bankruptcy

[Airlinelifer]

Why don't you write to Boyd and tell him how much you know and how much he doesn't. Boyd runs a multimillion dollar consulting firm. I'm sure your firm (what was the name of that by the way?) does far better.

Why don't you post again here after you have heard back from Mike. I think we would all like to know what he has to say.

BTW, here is the email address:

info@aviationplanning.com

Just a little trip on the World Wide Web time machine.

http://www.pbs.org/newshour/bb/transportation/march97/jets_3-17.html

 

[WorldTraveler]

Just a little trip on the World Wide Web time machine.

http://www.pbs.org/newshour/bb/transportation/march97/jets_3-17.html

...which goes to show that even though alot of pilots, including many at DL, could have wished that DL had never been allowed to start a codesharing relationship with Comair, one of the early adopters/users of the RJ, DL as a whole has adapted several times to the changes in the industry and DL pilots in particular sit better than average relative to their peers despite DL having a weaker scope policy than carriers like AA and PMCO. DL's network has probably benefitted more from the RJ as well. As DL now has become very aggressive in using larger RJs, they continue to turn into a network advantage - and they have given their pilots int'l growth to attempt to offset what they have lost through regional carrier flying.
Sometimes, strategic strength comes from doing something that will be a short-term benefit knowing that other competitors will not be able to adapt as quickly.
.
If the news about point to point mainline flying on AA is accurate, they could decide it is not worth fighting the regional scope issue any longer and create a business model alongside the hub and spoke system that can help overcome some of AA's deficiencies with respect to regional carrier flexibility.
.
Business is constantly adapting... companies that can adapt will win... the rest become followers.

 

[Buck]

Boyd comments on route restructuring.

 

[FWAAA]

Boyd takes the train.

There's nothing in this article about Boyd taking a train. Only reference to Boyd is the oft-repeated claim that the 50 seaters will be retired faster than previously thought.

 

[Buck]

There's nothing in this article about Boyd taking a train. Only reference to Boyd is the oft-repeated claim that the 50 seaters will be retired faster than previously thought.

I understand. I was just referring to the fact that reducing the service to smaller communities might bring rail travel back into focus. Did not know where else to post the article. I did not think it should be in the bankruptcy thread.

 

[2ndGENAMT]

Common sense says that shutting someone up because you don't agree with them is a rather risky way to live; valor dictates listening to counter points of view and then engaging in a discussion on where you believe the other person is not correct.
Thank you for demonstrating valor and common sense..... and I would very much like to see AA people be pleasantly surprised but let's face it, even the most dismal projections about the airline industry have missed the mark when it comes to the movement towards the bottom. The US airline industry remains highly unstable and competitive.
.
Many of the top executives and analysts who have been in the industry more than 10 years have spent time at AA in management or leadership positions which is a tribute to how well run AA used to be. But 8 years of standing still has cost AA a huge amount and an 18 month trip through BK at best will put AA back on par with its peers. Returning AA to a position of leadership in the industry may take a whole lot longer.
.
Boyd's focus on helping airports, esp. small airports - is one of the largest portions of aviation consulting and analysis outside of what is done by investment companies. Airport consulting is far less focused on the dynamic competitive nature of the industry which is what market analysts do.
.
For the record, one analyst has already said they expect AA to cut 10% of its capacity to the benefit of its competitors.
http://www.marketwatch.com/story/jp-morgan-raises-its-airline-outlook-2011-12-01
Given that there has never been an airline go through BK w/o cutting capacity and w/o having competitors jump all over its markets, I'm not sure how any one could believe AA will be any different.

Creditors are loathe to see companies get involved in expensive competitive wars in BK... they are interested in preserving their investment and maximizing their recovery. BK is the ideal place to leave markets that don't work and build the business around what does work.
.
NYC and CHI are two of AA's most competitive markets - and are also ones where AA has lost quite a bit over the past several years to competitors. There is every reason due to the slot deal, the UA/CO merger, growth of LFCs at ORD etc that the trend will continue. Throw in the fact that competitors know that AA is strategically hamstrung for the next several years while in BK and it is foolish to think that AA can peacefully restructure while competitors sit quietly on the sidelines.

Glad you changed your approach, Buck. The bottom line is that the chances are very high that AA won't come out of BK with the same network it has now.... and it will lose position in many of its key markets... that is just what happens in BK in a competitive industry.
As a mechanic (not sure if you are line or base), you may not be directly tied to a city.. but if you are line and are in one of the more competitive NYC or ORD markets, I would think about heading south if you could... AA is likely to cut deeper network and personnel wise in the north in favor of its strengths in DFW and MIA.
If you are in base maintenance, then you are part of that group that are only as good as the whole... positioning yourself around what is most likely to remain is the best protection you can personally take.
.
Given that a 10% capacity cut could result in at least a 10% reduction in the workforce, there will very likely be job cuts. large ones.
Assuming that AA's trip through BK will simply take care of "back office" and accounting adjustments could be a very deadly mistake to make.
.
BTW< those who believe AA will quickly shed hundreds of RJs in BK might want to double check AMR's 2010 annual report where AA classifies all of its AE fleet as owned, not leased assets. Yes, they can park those aircraft but they have to write down those assets - which are also undoubtedly collateralized. Unless AMR has a unique way of classifying owned vs. leased assets, you don't reject leases on owned aircraft.

WT you bring a lot of insight and I enjoy reading, however you stated that JP Morgans analyst said AA would cut capacity by 10% when in fact "We are modeling for a 10% AMR capacity cut, which is expected to divert 6%, or about $1.4 billion of revenue," the firm said in a note to clients. is what was stated which leads me to believe the Boyd Group has some viability...Could some of the capacity cuts by AE be diverted to AA as well as other airlines??

 

[eolesen]

The only thing i can think of with higher operating costs than a 37 seat RJ is Amtrak's service to small communities.....

 

[TWU informer]

The only thing i can think of with higher operating costs than a 37 seat RJ is Amtrak's service to small communities.....

And amazingly both are now Government Subisidized er I mean by you and me.
US Postal Service going broke too. Bravo
Another couple of year of the same, and You will be subsidizing me and my co-workers too.

"even though you can’t see or hear them at all, a person’s a person, no matter how small."
Horton Hears a Who

 

[2ndGENAMT]

Several years ago the PBGC changed somme of its rules to encourage freezing a pension rather than termination. I think they allow 15-17 years to make up the funding shortfall, much easier on the company in question rather than have the rules almost encourage (UA) a company to terminate. In the case of UA, who did terminate, the PBGC as one of the largest unsecured creditors was able to muscle in an make sure they got equity in the new company. So in the end, for PBGC they were made whole or nearly so, but that benefit as I recall did not help the employees. Let's hope AMR freezes and does not terminate. Termination for someone who wants to collect at 55 is brutal, reducing your payout by 50%.

I do not think your payout under a Frozen versus a Terminated plan will be any different no matter how old you are when you begin benefit payments,unless you are above the PBGC max payment..

 

[WorldTraveler]

WT you bring a lot of insight and I enjoy reading, however you stated that JP Morgans analyst said AA would cut capacity by 10% when in fact "We are modeling for a 10% AMR capacity cut, which is expected to divert 6%, or about $1.4 billion of revenue," the firm said in a note to clients. is what was stated which leads me to believe the Boyd Group has some viability...Could some of the capacity cuts by AE be diverted to AA as well as other airlines??

the idea is that capacity cuts should force up yields which increase revenue on the remaining capacity. Analysts consider AA/AE capacity and revenues the same for revenue forecasts since AE pays for and receives all of the revenues.
.
2ndGen,
For a person w/ full years of service and retiring at full age, then there are no changes in benefits under a terminated plan... but if you have less YOS or are younger, then the offset is likely to be much larger under the PBGC... and most airline pension plans provided for benefits before the age when the PBGC would begin paying them.

.
E,
the only benefit to Amtrak service is that the rail line probably goes through the cities being served by Amtrak - not so with regional carrier subsidies.
.
What isn't mentioned is that there are many countries in the world that have high quality bus transportation that is far cheaper than rail, uses existing infrastructure, and carries about the same number of seats as an RJ.
The US has some of the best highways in the world... if the US were serious about reducing costs while not cutting off service to small cities within 3-4 hours of a major airport, they would consider subsidized bus transportation.

 

[eolesen]

I do not think your payout under a Frozen versus a Terminated plan will be any different no matter how old you are when you begin benefit payments,unless you are above the PBGC max payment..

No, it will most likely be different...

Under a frozen plan, the company's terms still apply, which means you can still draw full benefits at age 60 (pretty certain all of AA's plans moved to 60 from 62). Under a terminated plan managed by the PBGC, "full benefits" don't kick in until 65. There may also be some differences where survivor benefits are concerned.

 

[BoeingBoy]

It's my understanding that when a DB plan is frozen the covered employees stop accruing benefits for more years of service. So someone who is 50 when the plan is frozen will get the benefit that retiring at 50 would give. Of course, the DC plan is supposed to make up some/all of the difference but the risk that it won't is entirely on the employee.

Likewise with terminated DB plans except the PBGC bases it's calculation of benefits on a hypothetical retirement 3 years prior to plan termination. So the 50 year old, whose DB pension was terminated, has his/her benefit calculated on "retiring" at 47. Once everyone's "retirement" benefit is calculated, there is the money in the DB plan and the PBGC maximum benefit tables to consider.

Jim

PS - there was a change in the law that affected PBGC paid benefits for pilots but I'm not sure it affected anyone else.

 

[Kev3188]

It's my understanding that when a DB plan is frozen the covered employees stop accruing benefits for more years of service. So someone who is 50 when the plan is frozen will get the benefit that retiring at 50 would give. Of course, the DC plan is supposed to make up some/all of the difference but the risk that it won't is entirely on the employee.

Kind of?

The first part is correct, though I'm not sure about the latter. In my case at NW, the multiplier-and your accruals stopped on that date. So if you had, say, 10 years in, and it was $51/mo. x years of service, that was that, even if you won't retire for many more years.

Not sure about the age projection though (unless I'm misunderstanding you?).

 

[BoeingBoy]

If you're talking about the DC plan making up for some/all the loss incurred if the DB plan is frozen/terminated, all I'm really saying is that employees with time remaining to retirement will build up some value in their DC plan (which has replaced the DB plan at all the network carriers that filed bankruptcy so I assume will at AA also). How much will be accumulated in the DC plan depends on the number of years the company makes contributions (years left till retirement) and the performance of the DC plan investments chosen by any specific employee.

In other words, for working employees the end of the DB plan through freeze/termination doesn't mean the end of accruing retirement benefits. It just means the end of accrual toward a future defined benefit.

Jim

 

[will fix for food]

How is Boyd's fleet forecast holding up so far?