Maintaining a Cost Advantage Is Critical for US Airways

[Beancounter]

It is my understanding APA President Dave Bates and other AA union leaders have met with Doug Parker and AA’s unions are favorable towards a merger. Why? The combined US Airways and AA will generate profits that neither can independently.

A merger between the two companies could yield more than $1.5 billion per year in added revenue and cost savings, officials with US Airways are telling American’s creditors. That’s according to a report in the Wall Street Journal that cites people familiar with the situation.

According to ATA SmartBrief, "US Airways is said to be briefing creditors of AMR Corp. on plans for a possible merger with American Airlines, sources say. US Airways would seek to create a merger plan before American's parent exits bankruptcy protection, a move that Allied Pilots Association spokesman Tom Hoban says may be welcome to allow labor unions to negotiate with new management."

Click here to read the story.

According to Bloomberg, "The leverage pendulum has swung fairly decisively toward US Airways if the company should choose to come to AMR’s labor groups with alternatives to what’s probably going to be fairly draconian cuts,” said Wolfe Trahan’s Keay. “Creditors suddenly have a lot of leverage because of that conditional provision for exclusivity.”
Tom Hoban, a spokesman for the Allied Pilots Association, said that if the union couldn’t reach a consensual labor agreement with AMR as the carrier seeks to rework contracts, the group might be willing to work with new management brought in as the result of a merger.“We’ll consider all options on the table,” Hoban said.

Click here to read the story.

In my opinion, AA employees may have two options: Merger with US Airways and obtain industry leading contracts, which means less of a S.1113 haircut or remain independent and run the risk of fragmentation with bottom of the barrel contracts.

I noticed someone put a negative down on the reputation for this post, that is before I zeroed it out. What, is someone finding the reality of American's situation too painful to look at it rationally?

Bean

 

[Beancounter]

Well Chip, if you wonder why people think you're out to lunch, re-read your last statement. I have to wonder who you think you're fooling or impressing with your bravado.

Please disregard my previous question, you just answered it for me.

Mr. Bean

 

[AAviator]

Please disregard my previous question, you just answered it for me.

Mr. Bean

Depends on how you define "rational"..


Bean, could you direct me to where I get my LCC parking pass???? This is soooo in the bag, I might as well get measured for my LCC uniform! Why not?? I'm off until Thursday!!!

 

[Beancounter]

http://www.airlinefinancials.com/uploads/2010_mainline_summary.pdf

Page 2. Revenue per pilot. LCC pilots generate ~40% more revenue per pilot for the company than Southwest pilots do. Yet you're paid a little better than half.

p.s. I'm not expecting you to answer....

Here's an answer then from someone that knows a little bit about accounting: If you take that number and print it on the backside of a previously used piece of paper, it wouldn't be worth the paper it was printed on. They simply divided revenue by number of pilots. Do you have any idea of the number of inputs and variables that number doesn't include? I wouldn't say that number is totally worthless, but pretty darn close.

Bean

 

[AAviator]

Here's an answer then from someone that knows a little bit about accounting: If you take that number and print it on the backside of a previously used piece of paper, it wouldn't be worth the paper it was printed on. They simply divided revenue by number of pilots. Do you have any idea of the number of inputs and variables that number doesn't include? I wouldn't say that number is totally worthless, but pretty darn close.

Bean

Ok Bean, I was baiting USA320Pilot, but you took the bait.. Same chart, scroll down to unit costs, excluding fuel and wage/benefits.

Who are the absolute highest two?

As an accountant, tell me what this means??

 

[Res Judicata]

Luckily for Parker the Eastholes are enthusiastically embracing the idea of their LOA93 cost advantage. 30 year Capts @ $124.00/hr?.....................

 

[Dont call me Shirley]

I think it's a bit more complex than that. US Airways route structure creates around a 13% cost differential that is currently being absorbed by the work force. This reasons for this differential are many but one commonly cited reason is the shorter average stage length. ......

The issue here is how Management manages the business. It is their short sighted approach that hinders growth and profitability at the expense of those who work there.

Very insightful post indeed. Sparrow...

 

[USA320Pilot]

AA,

I fully understand the reality of both AA and US Airways' situation. What I find interesting is that you spend so much time on the US Airways board and break the Forum's rules. Maybe you should be more concerned about your own failing company than US Airways and not breaking rules.

Furthermore, can you tell me why Allied Pilots Association spokesman Tom Hoban says APA may welcome for his union to negotiate with new management" when US Airways seeks to create a merger plan before American's parent exits bankruptcy protection?

And, why did Allied Pilots Association President Dave Bates recently meet with Doug Parker according to USAPA?

Hummm....

USA320Pilot

 

[Beancounter]

Ok Bean, I was baiting USA320Pilot, but you took the bait.. Same chart, scroll down to unit costs, excluding fuel and wage/benefits.

Who are the absolute highest two?

As an accountant, tell me what this means??

It means you just proved the point USA320Pilot and I made earlier. US Airways does not have the ability to pay the same wages as other airlines because of it's costs and position. American is in a similar situation. Combining the two would improve both carriers ability to lower per unit costs. You just trapped yourself, congratulations.

Bean

 

[CapnCockroach]

Sure, and a merger with AA will magically remedy that disparity. The same Parker who has underpaid his flight crews for nearly seven years will suddenly open up his pot of gold and share it with the US (and AA) pilots on "industry-leading contracts."

Only the east moron pilot base...and that is by their choice. They love LOA93...and so does management.

 

[AAviator]

AA,

I fully understand the reality of both AA and US Airways' situation. What I find interesting is that you spend so much time on the US Airways board and break the Forum's rules. Maybe you should be more concerned about your own failing company than US Airways and not breaking rules.

Furthermore, can you tell me why Allied Pilots Association spokesman Tom Hoban says APA may welcome for his union to negotiate with new management" when US Airways seeks to create a merger plan before American's parent exits bankruptcy protection?

And, why did Allied Pilots Association President Dave Bates recently meet with Doug Parker according to USAPA?

Hummm....

USA320Pilot

Breaking forum rules? Who's asking for peoples identity almost daily? Since when are you the rules police? I see they pulled your "Chips Corner" from you a few years ago.. Does that association entitle you to break the forum rules yourself??

Re: Tom Hobans statement.. Do you think it wise to explore/consider options when someone has a gun pointed to your head? Thats what BK brought us. You may not believe me, but Dave Bates is going to talk with anyone who has an offer that best suits the long term interests of the APA represented pilots. Do you think that maybe TPG, or IAG, or DAL may spend some time with the APA reps during this process?? Hmmmmm? But back to Tom Hoban, and your question.. Unlike your union, ours will publicly take a shot at management, beyond the "they won't negotiate with us" crying your union does. Yes Tom Hoban said that.. Was it an expression of desire to do something specifically with LCC? Ha ha ha ha.. In your dreams. (Tell me, do you honestly think he meant APA desires a deal with LCC?)

I do believe Bates has been to Tempe. I would expect him to go and listen to what can be of benefit to AA pilots. Its part of the process Chip. He will go and talk with DAL.. He will go and talk with TPG. He will go and talk with IAG.. He will go and talk with anyone else that come forward.. He (our seat on the UCC) may also vote in favor of our stand alone plan.. lets not put our cart before the horse here Chip, we all know you're all too familiar with how this works....

The question I have for you is, will you be able to handle that when the time comes?
Did I answer your question? Good.

Your turn.

 

[AAviator]

It means you just proved the point USA320Pilot and I made earlier. US Airways does not have the ability to pay the same wages as other airlines because of it's costs and position. American is in a similar situation. Combining the two would improve both carriers ability to lower per unit costs. You just trapped yourself, congratulations.

Bean

Hardly, Take a look at AS, and B6, or even organic growth. My point is that there are smoother, less onerous possible combinations, and solutions out there than LCC, THAT PROVIDE FAR GREATER BENEFIT AT LESS COST. You've got to step outside your paradoxical belief that the only solution for AA's problems is a merger with LCC. While AA's current plan of organic growth hasn't been popular, it too is still an option.

Your turn.

I don't think USA320Pilot can live in a world outside of press releases.

 

[Beancounter]

Depends on how you define "rational"..


Bean, could you direct me to where I get my LCC parking pass???? This is soooo in the bag, I might as well get measured for my LCC uniform! Why not?? I'm off until Thursday!!!

I never said it was a sure thing. I have no clue what's going on behind our companies closed doors and even if I did I sure as shooting wouldn't post it on a public forum. Most the management types I know aren't even in this business. Had beers a while ago with a controller at an equity company/hedge fund. His knowledge of airlines? Even less than ours. Lucky bugger.

Bean

 

[Beancounter]

Hardly, Take a look at AS, and B6, or even organic growth. My point is that there are smoother, less onerous possible combinations, and solutions out there than LCC, THAT PROVIDE FAR GREATER BENEFIT AT LESS COST. You've got to step outside your paradoxical belief that the only solution for AA's problems is a merger with LCC. While AA's current plan of organic growth hasn't been popular, it too is still an option.

Your turn.

I don't think USA320Pilot can live in a world outside of press releases.

You're fantasizing, I suggest you deal with reality and the current situation you are in. I could fantasize too. Shoot, I'd love it if US merged with AS, not gonna happen.

Bean

 

[AAviator]

You're fantasizing, I suggest you deal with reality and the current situation you are in. I could fantasize too. Shoot, I'd love it if US merged with AS, not gonna happen.

Bean

touche'