Cash balance drops by more than $500 million in August; AA reports monthly earnings

[FWAAA]

Throughout the spring and early summer, AA's cash balance grew significantly as summer vacationers purchased advance purchase tickets and AA was temporarily relieved of paying some obligations. During August, AA provided transportation for many of those vacationers who paid for their tickets long ago plus AA repaid some debts and paid for some new airplanes. As a result, AA's cash balance declined by $535 million in one month.

During the month of August, AA's unrestricted cash balance (including short-term investments that are considered equivalent to cash) declined from $4.837 billion on July 31 to $4.302 billion on August 31.

During the month of August, AA earned $55 million before special items and bankruptcy-related expenses. Including all items, AA's net loss was $82 million in August:

http://www.amrcaseinfo.com/pdflib/4713_15463.pdf

Here is the July operating report for comparison: http://www.amrcaseinfo.com/pdflib/4183_15463.pdf

 

[Bob Owens]

During the month of August, AA's unrestricted cash balance (including short-term investments that are considered equivalent to cash) declined from $4.837 billion on July 31 to $4.302 billion on August 31.

Maybe thats why they arent giving us our Sept 12 increase until the middle of October.

 

[FWAAA]

Does AA plan to make the payraise retroactive to Sept 12 (DOS) or are they taking the position that middle of October is close enough?

 

[Bob Owens]

Does AA plan to make the payraise retroactive to Sept 12 (DOS) or are they taking the position that middle of October is close enough?

They say it will be retro, but not paid till October.

 

[WorldTraveler]

AA, IIRC, has just settled a number of lease agreements that were disputed.... in some of them, AA was in arrears, in many others they were not. But AA still has alot of unfinished lease activity that, when caught up, will drain their cash as they have to settle back activity.

Add in the cash required for buyouts and the decreased revenue that AA is very likely seeing based on increased bookings at other carriers and there will be pull in two directions on AA's cash.


The cash balance was going to go down.... that is just part of the process of being in BK and the growing balance you saw was related to the seasonality of the business combined w/ the fact that the first phase of BK helps to build cash and the 2nd half of BK (which AA is now in) drains cash.

 

[BoeingBoy]

There's also the strange world of bankruptcy accounting where rejecting contracts and returning equipment, freezing/terminating retuirements/retiree health care, etc show up at the time it happens as an expense but convert to income at bankruptcy exit. In US' first bankruptcy, it burned cash every month (disregarding DIP financing and cash raised by cancelling a/c deliveries, selling jetways, etc) while in bankruptcy but reported over a Billion dollar profit the quarter it emerged from bankruptcy.

AA is to the point in the bankruptcy process that a big chunk of money is subject to these accounting oddities.

Jim

 

[737823]

There's also the strange world of bankruptcy accounting where rejecting contracts and returning equipment, freezing/terminating retuirements/retiree health care, etc show up at the time it happens as an expense but convert to income at bankruptcy exit. In US' first bankruptcy, it burned cash every month (disregarding DIP financing and cash raised by cancelling a/c deliveries, selling jetways, etc) while in bankruptcy but reported over a Billion dollar profit the quarter it emerged from bankruptcy.

AA is to the point in the bankruptcy process that a big chunk of money is subject to these accounting oddities.

Jim

All true. I think the fact that some reappear as income upon exit has to do with conservatism and accrual of loss contingencies but not accruing gain contingencies until they are highly probable, or recognizing them when realized as stipulated by US GAAP. Just curious, I've read your posts before about the financial accounting in the airline business do you have an interest or background in this? You come across as knowledgeable.

Josh

 

[BoeingBoy]

Just saw how it worked in two bankruptcies, although US' first had the biggest effect since all the leases/EETC's were renegotiated then.

Jim

 

[Overspeed]

Maybe thats why they arent giving us our Sept 12 increase until the middle of October.

Bob you were briefed and you still act like a child

 

[Bob Owens]

Bob you were briefed and you still act like a child

Briefed? Sent an email that did not say much. The ATD accepted the excuse without challenge that we could see for the delay. If they were cutting our hourly rate you can bet it wouldnt take two months for them to press a few keys.

 

[unionguy1]

Briefed? Sent an email that did not say much. The ATD accepted the excuse without challenge that we could see for the delay. If they were cutting our hourly rate you can bet it wouldnt take two months for them to press a few keys.

Just like they did our pay and vacation in 03. They wasted no time with that extraction.

 

[Frank Szabo]

Just like they did our pay and vacation in 03. They wasted no time with that extraction.

... and the vacation stolen in 2003 had already been earned ...