Goodwill

[Bob Owens]

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On 5/9/2003 11:03:21 AM Connected1 wrote:

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What about the Charge for "Goodwill"?
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If you would like to write off some goodwill on your next tax return, try turning back time prior to 9/11 and purchasing some route authorities. There''s just something about terror attacks that makes their values drop like pets.com.

Did they lose those assetts or did they just claim that trhey were worth less? The value of my 401K went down but I cant write it off unless I actually have a loss. If things get better and these intangible assetts increase in value does the company get taxed on them?

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Why is AA still buying new planes?
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There is a difference between buying and taking delivery. The planes that we are receiving went firm a long time ago. I''m sure that you are happy that we declined as many options as we could.


If we went BK and incured the $289 million charge like UAL we could have walked away from those deals and saved around $3 billion according to the 10K. We also could have gotten rid of the expensive leases and renegotiated the contracts on the JFK terminal.

Once the bond funds have been raised, you''re going to have to pay it back anyway, so you might as well use it.

Even in BK?


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[jetsandprops]

Don''t worry all that much about the balance sheet -- something the CFO should do other than cash is king . . . no cash no company.

Given how much passengers are willing to pay to fly all must accept that costs must be lower than revenues by 7 to 10 percent for the company to continue. This is a simple equation.

The reality is either the new low fare airlines pay their people less or work them harder. What is key is they set the fares not American.

 

[Bob Owens]

buzzkill

I know that''s a lot of accounting lingo, but it appears that everything is being done in accordance with accounting rules and the law.

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Thats not the question. The question is were the figures meant to decieve the workers into thinking that things were worse than they actually were?

I dont doubt that it was all legal, after all who makes the laws?​

"unidentifiable intangible assets" in other words "make believe".

 

[buzzkill]

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On 5/9/2003 5:51:56 PM Bob Owens wrote:

buzzkill

I know that''s a lot of accounting lingo, but it appears that everything is being done in accordance with accounting rules and the law. 

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Thats not the question. The question is were the figures meant to decieve the workers into thinking that things were worse than they actually were?

I dont doubt that it was all legal, after all who makes the laws?​

"unidentifiable intangible assets" in other words "make believe". 

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Seriously, you are making a big deal out of an accounting charge that is common and understood, it''s making you look a little bit silly. Please save what credibility you have left on the subject and stop.

If you are trying to convince people that AA is really not in financial trouble, it''s going to be a tough sale.

 

[Busdrvr]

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On 5/9/2003 532 PM Bob Owens wrote:



Did they lose those assetts or did they just claim that trhey were worth less? The value of my 401K went down but I cant write it off unless I actually have a loss. If things get better and these intangible assetts increase in value does the company get taxed on them?


One large goodwill item is usually associated with the purchase of another airline (Reno, TWA). Lets say you buy an airline with a NEGATIVE net worth (or a book value less than the amount you paid). The diff goes on the books as "goodwill", ie the value of the company was not in the value of the Jets and other assets vs liabilities, but in "goodwill" or loyal customers. AMR has now determined that value is now Zero. Cash flow from operations would prob back up that assesment.

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Why is AA still buying new planes?
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There is a difference between buying and taking delivery.  The planes that we are receiving went firm a long time ago.  I''m sure that you are happy that we declined as many options as we could.


If we went BK and incured the $289 million charge like UAL we could have walked away from those deals and saved around $3 billion according to the 10K. We also could have gotten rid of the expensive leases and renegotiated the contracts on the JFK terminal.

Boeing doesn''t just start building jets under the assumption that you will be ready, willing and able to pay when the time comes, they usually require SUBSTANTIAL deposits (that they won''t give back) before starting assembly on a firm order.

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[FWAAA]

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On 5/9/2003 841 PM buzzkill wrote:

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On 5/9/2003 5:51:56 PM Bob Owens wrote:

buzzkill

I know that''s a lot of accounting lingo, but it appears that everything is being done in accordance with accounting rules and the law. 

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Thats not the question. The question is were the figures meant to decieve the workers into thinking that things were worse than they actually were?

I dont doubt that it was all legal, after all who makes the laws?​

"unidentifiable intangible assets" in other words "make believe". 

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Seriously, you are making a big deal out of an accounting charge that is common and understood, it''s making you look a little bit silly. Please save what credibility you have left on the subject and stop.

If you are trying to convince people that AA is really not in financial trouble, it''s going to be a tough sale.

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No - Bob Owens is onto something. He''s uncovered, thru brilliant detective work and extensive study of the 10-K that AMR isn''t really hurting at all.

What must really be eating at him is why none of the other institutional investors in AMR can''t see the same deception that he has uncovered. After all, since they don''t work at AA, there''s no way they have the ability to sniff out fraud in the company''s financial statements like he can.

Yes, Mr. Owens, it is all just a grand conspiracy to bust the unions.

And you''re right - AA''s problems are entirely the fault of poor management - specifically, Don Carty and Gerard Arpey. Never mind that some of your competitors are bankrupt and that others are nearly as bad off as AA - those companies all suffer from the same crappy management as AA. What a coincidence that every full service major airline all suffers from terrible management IN THE SAME TWO YEAR PERIOD.

Yep - they colluded to piss away all their cash so they could bust the unions.

Get help.

 

[Bob Owens]

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On 5/9/2003 841 PM buzzkill wrote:

Seriously, you are making a big deal out of an accounting charge that is common and understood, it''s making you look a little bit silly. Please save what credibility you have left on the subject and stop.

If you are trying to convince people that AA is really not in financial trouble, it''s going to be a tough sale.

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Seriously, are you worried about my credibility?

Common and understood? By who? Is this really that common? Or only common for large companies? Its certianly not something that I''ve ever been able to write off, nor most other taxpayers. Why should these guys get to write off losses that are only potential at best?

$988 million in losses of as Buzzkil defined "unidentifiable intangible assetts". Nearly a third of the total loss claimed. We are talking a huge amount of money here. Its a misrepresentation of the facts. How much did they really lose?

Is AA in trouble? Probably, just like the rest of us. But we dont have the option at inflating our losses by 30%. AA lost $1.7 Billion in 2001, they then claimed that they lost $3.5 billion in 2002 when it was at most more like $2.5 billion. When you consider that 9/11 and 587 both only happened in the third quarter then the additional $700 million dollar loss is not as alarming as alarming $1.8 billion. Losses of 2002 were really only around 40% more than 2001 instead of 100 % more.

 

[Bob Owens]

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On 5/10/2003 927 AM FWAAA wrote:


No - Bob Owens is onto something. He''s uncovered, thru brilliant detective work and extensive study of the 10-K that AMR isn''t really hurting at all.

What must really be eating at him is why none of the other institutional investors in AMR can''t see the same deception that he has uncovered. After all, since they don''t work at AA, there''s no way they have the ability to sniff out fraud in the company''s financial statements like he can.

Yes, Mr. Owens, it is all just a grand conspiracy to bust the unions.

And you''re right - AA''s problems are entirely the fault of poor management - specifically, Don Carty and Gerard Arpey. Never mind that some of your competitors are bankrupt and that others are nearly as bad off as AA - those companies all suffer from the same crappy management as AA. What a coincidence that every full service major airline all suffers from terrible management IN THE SAME TWO YEAR PERIOD.

Yep - they colluded to piss away all their cash so they could bust the unions.

Get help.

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Lets see. AA pays big bucks to revamp the JFK terminal. Before the paint is dry they start ripping it down to build an entirely new terminal. In the end, after spending billions they will get and extra handfull of gates.

AA buys fancy first class "modules" that cost so much they admit that the premiums charged for First Class will never cover the cost.

AA buys TWA.

AA buys Air Cal, abandons most of the routes, buys those routes back again when they buy Reno.

AA builds RDU and BNA.

AA builds of ISP and then pulls out, l;eaving the infastructure ans facilities to SWA.

AA builds up hubs at SJU and MIA.

Didnt AA invest in Midway?

Time and time again these guys have pissed away billions. If not for the competative advantage given by employees this company would have been gone years ago.

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[FWAAA]

Mr Owens: I agree with you now that you are making sense and not spouting about coverups in the financial statements.
But first a comment about your accounting prowess.

AMR "lost" $3.5 billion in the accounting sense in 2002, and your protests to the contrary, every accountant in the USA will agree with Ernst & Young - AMR really had a net loss that big.

Had you taken accounting 101 (or remembered it, if you did take it), you would understand the difference between accounting losses and negative cash flow. As I have posted many, many times, what really matters right now is that AMR spent about $1.8 billion more in cash last year than they took in.

That is the immediate fire at AA that your concessions helped to put out.

Over the long haul, AMR must also put an end to the accounting losses (ie, post a GAAP profit), but for now, balancing the amount of cash out with the cash in is the problem that must be fixed or you will be permanently out of a job.

Now onto our point of agreement:

I agree that AA''s schizophrenia as to the west coast is puzzling. I live in LA, so it has affected me quite a bit as I try to fly up and down the left coast.

I cannot understand why AA spent like a sailor on the west coast several times only to wind it up - by the way, you left out the SJC hub which and terminal which benefited WN greatly when AA gave up.

You also left out the $2.5 billion AMR wasted when it repurchased its own shares during the late 1990s at very high prices. Had AMR waited, they could have bought it all for about $200 million during March of this year. Instead, I bought a bunch of it to recoup my losses from the past decade (and recoup them I did).

You also left out from your list of AMR errors one of my all-time favorites:

$1.8 billion of profit sharing wasted on the employees during the 1990s. It doesn''t seem to have engendered any sense of family at AA - otherwise the employees might have stepped up sooner with voluntary concessions to help save the airline. Whole lotta good that $1.8 billion bought AMR.

I sure hope AA never makes that stupid mistake again.

One thing your list doesn''t address: How on earth can you explain the coincidence that every major full service airline in the US suffered from poor management during the same timeframe - 2001-2003?? One or two I could see. But every one??

 

[Bob Owens]

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On 5/10/2003 10:12:34 PM FWAAA wrote:

Mr Owens: I agree with you now that you are making sense and not spouting about coverups in the financial statements.
But first a comment about your accounting prowess.

First of all I'm a mechanic, not an accountant.

AMR "lost" $3.5 billion in the accounting sense in 2002, and your protests to the contrary, every accountant in the USA will agree with Ernst & Young - AMR really had a net loss that big.

And every accountant would admit that they really did not "lose" $3.5 billion. That at least $988 million in losses was a perk that a pro-business government uses to help transfer the tax burden from corporations to the people while leaving the impression that corporations pay a fair amount.

Had you taken accounting 101 (or remembered it, if you did take it), you would understand the difference between accounting losses and negative cash flow. As I have posted many, many times, what really matters right now is that AMR spent about $1.8 billion more in cash last year than they took in.

I took it, but that was 20 years ago. And yes, I remember the difference. One is real, and one is not. Again, these are gimmicks to lower the real tax that corporations pay. Was all of the $1.8 billion the result of increased wages or "other" expenses? My total income actually went down in 2002 compared to 2001. Most of my fellow mechanics had the same experience. If our income went down then how can we be responsible for the $1.8 billion shortfall? And why should we take further cuts to make up for it?

That is the immediate fire at AA that your concessions helped to put out.

Did it?

Over the long haul, AMR must also put an end to the accounting losses (ie, post a GAAP profit), but for now, balancing the amount of cash out with the cash in is the problem that must be fixed or you will be permanently out of a job.

I doubt that. Maybe AA would be permanantly out of business but that does not mean that I would be permanently out of a job, just this job at this company.

Now onto our point of agreement:

I agree that AA's schizophrenia as to the west coast is puzzling. I live in LA, so it has affected me quite a bit as I try to fly up and down the left coast.

I cannot understand why AA spent like a sailor on the west coast several times only to wind it up - by the way, you left out the SJC hub which and terminal which benefited WN greatly when AA gave up.

You also left out the $2.5 billion AMR wasted when it repurchased its own shares during the late 1990s at very high prices. Had AMR waited, they could have bought it all for about $200 million during March of this year. Instead, I bought a bunch of it to recoup my losses from the past decade (and recoup them I did).

You also left out from your list of AMR errors one of my all-time favorites:

$1.8 billion of profit sharing wasted on the employees during the 1990s. It doesn't seem to have engendered any sense of family at AA - otherwise the employees might have stepped up sooner with voluntary concessions to help save the airline. Whole lotta good that $1.8 billion bought AMR.

The profit sharing was contractual. They gave back pennies in exchange for dollars.

I sure hope AA never makes that stupid mistake again.

One thing your list doesn't address: How on earth can you explain the coincidence that every major full service airline in the US suffered from poor management during the same timeframe - 2001-2003?? One or two I could see. But every one??

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How do you explain that every major full serivice airline is a member of AirCon, CESTA and the ATA? Why didnt AA do anything for over a year to lower costs? Why did they wait until the last minute? The fact is in this business sometimes it pays to lose money. Losing money provides opportunity. It provides the opportunity to make loads of money later. On the one hand the industry is deregulated but on the other hand it is considered an essential industry. If only one airline was in financial difficulty then more than likely it would have gone out of business. In order for this to work they all had to be in the same boat, thats why AA continued to burn money for another year.

Explain to me how SWA pays their mechanics more than us but they are not in trouble? I know overhaul. Well thats bull. SWA never had OH and the initial costs for setting up overhaul are high. AA had OH before SWA ever came into existance. Those costs were paid off a long time ago. As SWA gets bigger and it becomes more cost effective (economies of scale-Economics 101) they too wil bring more OH in house.

The government has helped the airlines lower labor costs by allowing them to use the threat of bankruptcy. On the one hand the government says to airline workers that they cant allow them to strike because it will effect the economy, it tells two airlines they cant merge because it will effect competition but then turns around and says it will allow all the airlines to go out of business.

This was a scam on a grand scale. Yes it was a conspiracy. A conspiracy against the workers of this industry made possible by the weak willed overpaid leaders of the labor movement. In most countries that have a labor movement they would have seen how their opponents had stacked the deck and all just shut the whole thing down.

Is it so hard to see the hypocrisy?

"We cant allow United and USAIR to merge because it will hurt competition".

"There will be no strikes in the airline industry because people have a right to fly".

"If you do not accept concessions we will liquidate the airline"

So when market forces are in our favor the government prevents us from using our union affiliation to our best interests. When market forces are not in our favor they allow airlines to use BK to get out of contracts.

The government blocks mergers because they claim that it will hurt competition then says that it will allow both of those companies to liquidate if their employees do not accept concessions. Instead of one less competitor there would be two less competitors.

When have we ever seen legislation where working class people were forced to accept permanent concessions?

You can dismiss the conspiracy theory all you like. But its obvious here that something more was going on here than a purely market driven economic slump. The opportunity presented itself and they exploited it. And WE WILL REMEMBER!​

 

[FWAAA]

WN mechanics make more money than AA mechanics because the ones at WN do more work, on average, every year than the ones at AA.

Truth be told, all of WN''s workers do more work for their paychecks than AMR''s workers. No secret there. Their company is much more efficient.

Had your union (and all the other unions at AA) not negotiated such sweet featherbedded contracts over the years, then you too could be making more money just like your friends at WN.

Before you say it - I agree that AA''s management played a big part in buying labor peace with generous contracts. Problem was, none of it seemed to buy labor peace - AA''s workers have always hated AA''s managers no matter how well they have been paid.

But that''s the past. Unless you want to join another airline''s seniority list (at the bottom of that list), you''d better hope that AA''s current management can right the ship.

Yep - WN is the land of milk and honey. Too bad you hitched your wagon to the wrong airline.

 

[Bob Owens]

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On 5/11/2003 11:44:04 AM FWAAA wrote:

WN mechanics make more money than AA mechanics because the ones at WN do more work, on average, every year than the ones at AA.

Truth be told, all of WN''s workers do more work for their paychecks than AMR''s workers. No secret there. Their company is much more efficient.

Had your union (and all the other unions at AA) not negotiated such sweet featherbedded contracts over the years, then you too could be making more money just like your friends at WN.

Before you say it - I agree that AA''s management played a big part in buying labor peace with generous contracts. Problem was, none of it seemed to buy labor peace - AA''s workers have always hated AA''s managers no matter how well they have been paid.

But that''s the past. Unless you want to join another airline''s seniority list (at the bottom of that list), you''d better hope that AA''s current management can right the ship.

Yep - WN is the land of milk and honey. Too bad you hitched your wagon to the wrong airline.

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How about a few facts for a change?

What do you know about SWA or AA mechanics or their agreements?

 

[Bob Owens]

Fwaa;
Still waiting for facts.

 

[Buck]

Yep - WN is the land of milk and honey. Too bad you hitched your wagon to the wrong airline.


So you are admitting that Southwest is managed better than American? If the only factor is that the burden responsibilty of labors wages is who we select to be our employer?

 

[RV4]

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On 5/18/2003 9:49:56 AM Rational Thought wrote:

Bob, the problem you face is not really one caused by anything other than the market. You can find the boogie man anywhere you want, but at the end of the day revenue has to exceed costs. You can pretend that rule doesn't apply. Unfortunately for AA, it does. Want your pay and benefits back...work harder, faster and more productively. Allow AA to operate the same number of flights with less assets and less people. When the profits return, you can get your pay back. Lowering productivity only makes you a Luddite.
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And supply vs. demand dictates revenue.

And the TWU, in their imperial desire to fund the over supply so they can keep jobs and dues payers, has just lowered the woker pay and benefit standard for the whole industry.

How do you propose that we "get our pay and benefits" back when profits return? We are under contract for 5 plus years and AA sure isn't going to volunteer the change like the TWU leadership just did!