Is financing for AA's 320s locked in?

[Frank Szabo]

while history would agree that your proposed approach is the norm, you would do well to ask how that strategy has worked out for those who have gone before.
It is possible that the "grind the operation to a halt" mindset works for you because you have your exit strategy lined up, but not everyone is ready to watch AA fail and walk away unscathed.

You're mistaken. There's been a poster floating around for years, the picture being of an eagle swooping down, about impail a small mouse. The mouse is flipping the eagle the finger. You might consider that explaination.

I believe that Arpey has tried to avoid BK in part because he truly did not want to create an even worse labor environment than exists today.
While I agree that is a good motive, the problem is that as long as AA's problems remain unfixed, the challenge of turning the company around continues to grow.

Arpey hasn't any control over the process as it's the board that makes those decisions, as you well know - Arpey and company are no more than tools of the board of directors. He's welcome to spin it any way he wants but the bottom line is he's in his position to oversee the carrying-out of the board's directives - period.

While some don't like hearing it, AA's challenges are enormous; having any one group - employees, creditors, or suppliers - who decide they don't want to meaningfully participate in AA's turnaround is tantamount to beginning the process of shutting the place down for good. Whether it be Airbus or Boeing, banks or caterers, or employees - everyone has to be onboard in order for AA's turnaround to work.

Isn't that something the bastards should have though through before the the lies and thievery started? Is that any way to treat your "Greatest Asset"? Bullshit.

That might sound parochial to some but it is the simple reality.

The reality of the situation is rather simple. Some are required to do things other than their jobs in order to keep their bosses happy - those are called "salaried" - anyone you know?

 

[FWAAA]

Of course you and other anti unionists welcome a chapter 11 which screws workers and basically leaves management be.
Remember this, FWAAA.....Chapter 11 CANNOT repair morale. I will do my best to make sure that AA remains at the bottom of the DOT rankings and customer service. I am sure thousands more AAers will do the same.
As far as you seemed to be concerned reducing costs means screwing workers.....SO expect reduced costs to produced reduced morale.

Anti-unionist? Hardly, as I'm a happy dues-paying member of the AFT.

Doesn't fix morale? Really? Next you're gonna tell me that when the sun goes down, it gets dark outside.

Isn't morale already in the toilet? I'm not convinced it could get any worse, but I may be wrong. I frequently am.

DOT rankings? Knock yourself out. Doesn't matter to me if the flight departs/arrives within 13 minutes of schedule or within 33 minutes of schedule. Just doesn't matter.

And when if and when they do file, the FAA will show a strong presence of the operation system wide.. I once had an FAA inspector do a walk around and delay an aircaft for 6 screws missing over an entire wing covering multiple panels....

Wait until every mechanic suddenly aquires XRAY vision...

Six missing screws? How many are too many? Are these on the MEL?

For years now, I've been reading chest-thumping posts where many of you claim that you're more than willing to start over if AA spirals into the ground. So go ahead and shut it down and start over at the bottom somewhere else already. Or am I calling a bluff?

In this post of yours, you all of a sudden sound like you really don't want AA to file and do to you what UA, US, DL and NW did to their employees over the past 10 years. Can't say I blame you - I wouldn't want it to happen to me either.

Sure, it will be painful for some and no big deal for some others. For one thing, it may be the best pathway to unchaining yourselves from TULE and AFW and DWH and getting paid something closer to market rates for line maintenance. Your impotent union (the un-replaceable TWU) hasn't made that happen.

 

[WorldTraveler]

I don't disagree what any of you above say... but am just pointing out that there are alot of people at AA who don't want to shut the place down and aren't prepared even if it did happen.... face it, with a group as large as AA, there will be lots of people who can never be ready to give up their jobs.
.
But there is also plenty of evidence that any one of the groups above - and mgmt can be included as a separate group if you want - have the capability to shut the company down.
You may believe mgmt intends to shut the company down by its action/inaction - but that is your interpretation... meanwhile there are people who specifically espouse that strategy by labor.
Perhaps it is true that AA mgmt isn't interested in turning the company around and might profit more from dragging things on just the way they are.... but I'm not convinced that is the only reason they haven't acted so far.
.
Mgmt in US companies has alot more autonomy in reality than many think.... the BOD ultimately does call the shots but mgmt has the resources to provide the analysis to show what the company needs to do and can shape the message accordingly. It is a rare and very informed board in the US that runs counter to mgmt and usually by the time things get to that stage, they have removed the senior mgmt....

 

[FWAAA]

What is reality is the $20000 a year (and counting) that just I gave back to this company since 2003.
At some point AA needs to stop blaming labor expenses as the major reason for their losses.
Bad management decisons going back the last 25 years have gone unpunished to those who made the decisions to spend millions and millions opening hubs in RDU and BNA only to close them a few years later. How about removing seats for the MRTC campaign?? Only to reinstall those seats and DECREASE pitch for that ever so valuable customer....Getting out of routes so JETBLUE can take over?
These are just a few BAD decisions made by AA....But yet accordng to some on this board, only seem to think that WORST decison was NOT to file bankruptcy to SCREW the workers.

Nobody's "blaming" labor expense for AA's losses. Fuel costs that are more than five times the level of 1998-99 are the problem. Unfortunately, labor costs have been shown to be relatively easy to trim in or out of bankruptcy.

Yes, management has made many poor decisions over the years. You've posted about them many times. I can't imagine how you would like to "punish" management for those poor decisions, but that's neither here nor there. AA's costs are higher than its competitors, primarily in the labor column. It's management's fault that it agreed to contracts that do not require high labor productivity among the pilots and FAs. It's management's fault that it agreed to scope provisions in the TWU agreement that prevent management from matching UA and DL in the use of large regional jets. Management is to blame for those poor decisions, just like the ones you constantly point out.

And not filing Chg 11 in 2003? When the business school history books are written about poor management decisisons, I predict that most will conclude that Arpey's aversion to Ch 11 was a huge mistake. Perhaps he had good intentions (let the others screw their workers in Ch 11 and then let their costs rise after they emerge from Ch 11 to once again equal or exceed AA's costs) but it hasn't worked out that way, and the analysts are pointing that out ever more frequently. Perhaps they need to be more patient, as it's obvious that UA will have to increase its wages to pilots and maybe other workgroups to get combined labor agreements. DL's pilots are already passing AA's pilots in wages but it appears that DL's pilots may be more productive.

WT has pointed out many times that AA's total maintenance expenses are the highest of the legacy competitors based on data filed with the DOT. If outsourcing overhaul was actually more costly (as some assert in this forum), then you'd think that would affect the profits/loss numbers of UA, DL and US. But outsource they did, and they're not hiring mechanics in large numbers so they can bring that work back inhouse. If they do decide to re-populate their domestic overhaul bases, then AMT wages will spike very high because of the very real shortage of AMTs here in the USA, as Owens has pointed out recently.

 

[Frank Szabo]

... snip

I can't imagine how you would like to "punish" management for those poor decisions,

...

How about as the Commie Chinese deal with their human failures? One certainly wouldn't have to worry about the present group of rubes running another company into the ground.

In some respects, I'm getting to like the commie SOBs more every day. Maybe we could sic them on the twu, also.

 

[WorldTraveler]

In an SEC filing today, AMR expects its cash to decrease about $900M from the 2nd to 3rd quarters to $4.7B and for RASM to increase approximately 8%.

 

[Mach85ER]

On the pilot productivity end, management has had a golden opportunity the last few years to negotiate improvements that would work good for them and the pilots. the biggest factor that makes this easy to do and get a payoff over several years, is the aging pilot group and the number of normal retirements coming. APA has said they'd be willing to phase improvements in as furloughees are recalled and with specific performance goals. AMR has said they want all improvments from day one and basically that your pay raise is flying 90 hours instead of 78.

Productivity is going to rise due to a future younger workforce that is healthier and has less vacation than the group has now.

 

[Hopeful]

Anti-unionist? Hardly, as I'm a happy dues-paying member of the AFT.

Doesn't fix morale? Really? Next you're gonna tell me that when the sun goes down, it gets dark outside.

Isn't morale already in the toilet? I'm not convinced it could get any worse, but I may be wrong. I frequently am.

Gee, and people here think bankruptcy cures all woes.

DOT rankings? Knock yourself out. Doesn't matter to me if the flight departs/arrives within 13 minutes of schedule or within 33 minutes of schedule. Just doesn't matter.

Then why does it matter so much the airlines? Daily we have suprvisors breaking our balls over a 2 minute dely.

Six missing screws? How many are too many? Are these on the MEL?

Depending where they are located ona a panel and the number, you may be allowed to have some missing. I still had to take time out to make six separate E6 entries regardless if I deferred them or replaced them. I chose to replace them. But my point was that in the event of a CH11 filing, the FAA steps up oversight and increases inspections. Add that to pissed of pilots and mechanics, well all the labor savings AA thinks they are getting will be lost to pissed off passengers taking their business elsewhere.

For years now, I've been reading chest-thumping posts where many of you claim that you're more than willing to start over if AA spirals into the ground. So go ahead and shut it down and start over at the bottom somewhere else already. Or am I calling a bluff?

No one wants tho see it, but there are quite a few people who could care less. Airline workers have been getting screwed and starting over and over again since deregulation.

In this post of yours, you all of a sudden sound like you really don't want AA to file and do to you what UA, US, DL and NW did to their employees over the past 10 years. Can't say I blame you - I wouldn't want it to happen to me either.

Oh..but didn't bankruptcy make those airlines oh so profitable? I am fortunate to take by PBGC controlled pension and leave if and when it happens.

Sure, it will be painful for some and no big deal for some others. For one thing, it may be the best pathway to unchaining yourselves from TULE and AFW and DWH and getting paid something closer to market rates for line maintenance. Your impotent union (the un-replaceable TWU) hasn't made that happen.

I agree with you on separating from OH, but as for AA paying market rates for line maintenance, I don't buy it. Their past offers have not shown anything to suggest it.

 

[FWAAA]

In an SEC filing today, AMR expects its cash to decrease about $900M from the 2nd to 3rd quarters to $4.7B and for RASM to increase approximately 8%.

Yep, that's to be expected; recall that AMR borrowed about a billion dollars in mid-March secured by LHR and NRT slots to boost the cash balance and has probably paid down a billion or so of this year's maturing debt (and/or some combination of pension contributions) in the third quarter. We'll know for sure in about a month. I would bet serious money that AA generated positive operating cash in the third quarter but that maturing debt and pension contributions consumed at least a billion dollars.

 

[eolesen]

Probably not too far off on your estimate. Kevin from UBS hit on this during the 2Q earnings call:

Kevin Crissey - UBS Investment Bank

Can you guys just lay out the CapEx aircraft, other and scheduled debt maturities this year and next?

Isabella Goren

Yes, Kevin. If you just give me one moment, I am going to go back to my notes so we can do that accurately. Okay so for the year, our CapEx is about $1.7 billion, of which about $300 million is non-aircraft related. That's for 2011.

Kevin Crissey - UBS Investment Bank

Yes. And how about for 2012?

Isabella Goren

That at this point, we have not provided guidance on.

Kevin Crissey - UBS Investment Bank

And you had $2.5 billion of scheduled debt maturities this year.

Isabella Goren

Yes, that's correct.

Kevin Crissey - UBS Investment Bank

And some of that becomes unencumbers from aircraft that maybe could be refinanced, is that right?

Isabella Goren

Absolutely, yes. Throughout the remainder of the year, we do have aircraft that becomes unencumbered.

No idea which aircraft are on the soon-to-be-unencumbered list.

 

[FWAAA]

And during the first quarter conference call, Arpey said this about liquidity:

Given the current oil trends and volatility, it's also important to mention that in March, we completed a $1 billion private offering of senior secured notes backed by certain key assets of our international network, including our London Heathrow and Tokyo franchises, which connects key global business markets and our center for our strategy of attracting high-yielding business travelers.

With this offering, which we had planned for some time, we were able to take advantage of favorable capital markets. We now have one of the strongest liquidity positions among the major U.S. airlines. Our unrestricted cash balance increased from about 20% of 2010 revenues to about 25% of revenue following the transaction.

In terms of liquidity, our considerable cash balance should enable us to continue to invest wisely in strengthening our airline and our service while maintaining reasonable financial flexibility in the current environment. In addition, we anticipate that within our current fleet, aircraft that are Section 1110-eligible and are valued at over $1 billion -- well over $1 billion, will become unencumbered by the end of 2011, providing our company with additional financial flexibility.

Looks to me like AMR is carefully planning for the very real possibility that a Ch 11 filing becomes inevitable - that's the significance of referring to section 1110-eligible aircraft.

 

[eolesen]

I'd forgotten that little gem from January.

If AA mortgaged on a 20 year basis, there were 50+ aircraft delivered in 1991. Then it fell to 40 for 1992, 20 for 1993, and nine for 1994. The majority of those 100 tails were MD80s and B757s, but there were also a dozen 763s, and a handful of F100s and AB6s.

10 years ago was when AA renegotiated the TW aircraft, so it could also be a few of those being paid off.

 

[PhatSappy]

Maybe the SEC's website isn't available in your part of the world, but this was all spelled out in the 8K filing last month:



This covers just about everything thru 2017. Who knows what will happen from 2018 onward.

OURpay knows, and a few thousand other people ... B)

 

[chris perry]

Nobody's "blaming" labor expense for AA's losses. Fuel costs that are more than five times the level of 1998-99 are the problem. Unfortunately, labor costs have been shown to be relatively easy to trim in or out of bankruptcy.

Yes, management has made many poor decisions over the years. You've posted about them many times. I can't imagine how you would like to "punish" management for those poor decisions, but that's neither here nor there. AA's costs are higher than its competitors, primarily in the labor column. It's management's fault that it agreed to contracts that do not require high labor productivity among the pilots and FAs. It's management's fault that it agreed to scope provisions in the TWU agreement that prevent management from matching UA and DL in the use of large regional jets. Management is to blame for those poor decisions, just like the ones you constantly point out.

And not filing Chg 11 in 2003? When the business school history books are written about poor management decisisons, I predict that most will conclude that Arpey's aversion to Ch 11 was a huge mistake. Perhaps he had good intentions (let the others screw their workers in Ch 11 and then let their costs rise after they emerge from Ch 11 to once again equal or exceed AA's costs) but it hasn't worked out that way, and the analysts are pointing that out ever more frequently. Perhaps they need to be more patient, as it's obvious that UA will have to increase its wages to pilots and maybe other workgroups to get combined labor agreements. DL's pilots are already passing AA's pilots in wages but it appears that DL's pilots may be more productive.

WT has pointed out many times that AA's total maintenance expenses are the highest of the legacy competitors based on data filed with the DOT. If outsourcing overhaul was actually more costly (as some assert in this forum), then you'd think that would affect the profits/loss numbers of UA, DL and US. But outsource they did, and they're not hiring mechanics in large numbers so they can bring that work back inhouse. If they do decide to re-populate their domestic overhaul bases, then AMT wages will spike very high because of the very real shortage of AMTs here in the USA, as Owens has pointed out recently.

 

[chris perry]

FWAAA,incase you haven't noticed we are already working under the Vermont plan,management failed again... Management had a want list
they more than happily showed it like some kinda of pet rock...Either this or bankruptcy then the dreaded Vermont...ooooohhhh.. They have taken everything from the bankruptcy plan already from labor..... and not themselves. If they are planning again BK then its a double dip,plus none of the plans prior said nothing about scope pilots or the Twu. If they wanted it could have been taken in 2003... another failure if it was so important... It has become
a game....