New Concessions By Oct. 17?

[PRINCESS KIDAGAKASH]

Now that Northwest and Delta have filed for bankruptcy, I think it is inevitable that AA will ask for more concessions very soon. They will threaten bankruptcy,if we don't give more concessions. I would also think that they will push to have these new concessions in place before Oct. 17. Gotta protect those executive pensions and retention bonuses you know.

 

[FWAAA]

I disagree. Keep us informed on the non-existent bankruptcy threat, however.

 

[PRINCESS KIDAGAKASH]

FWAAA, you must be one of those financial guru's who said to buy Northwest stock on Tuesday. The concession train is building up steam again. AA will have to get more concessions to compete with the bankruptcy airline crowd. AA would be a fool not to attempt it.

 

[B.O.B.]

AA has to much cash on-hand and to many assets. We have over $3 Billion dollars on-hand!

 

[AMFAMAN]

I disagree. Keep us informed on the non-existent bankruptcy threat, however.

[post="301773"][/post]​

FWAAA,

Just wondering if you off-hand know the differences for CH 11 before or after Oct 17. Most of us know about the well publicized executive bonus changes, but is there any other significant advantage to filing prior to Oct 17 other than the bonuses?

 

[FWAAA]

FWAAA, you must be one of those financial guru's who said to buy Northwest stock on Tuesday. The concession train is building up steam again. AA will have to get more concessions to compete with the bankruptcy airline crowd. AA would be a fool not to attempt it.

[post="301779"][/post]​

Nope, I wasn't flogging NW stock on Tuesday.

I was pushing AMR stock in March-April of 2003, however, and did ok as a result.

On a serious note, Mr Owens has consistently posted for the past two years that the AA concessions are deeper than the concessions at UAL, even though UAL was in BK. If Owens is correct, then AA doesn't "need" more concessions right now, since its costs are lower than UAL's costs.

Dunno whether NW or DL will get their costs below AA's costs.

But I do know that the absolute costs aren't quite as important as whether the revenue exceeds those costs. AA doesn't need to get its costs down to Jetblue's or Southwest's costs as long as pax are still willing to cover AA's costs.

And make no mistake - AA's unit revenue is well above that of WN or B6. When AA's unit revenue falls (if it does), then concessions may be necessary.

But prior to October 17? If your prediction had any truth behind it, AA would not have "wasted" another $74 million on your pension contributions on Wednesday. It would have kept that money. Ya' don't contribute to pensions when you're on the verge of filing for Ch 11.

But don't let facts and logic get in the way of knee-jerk reactions like "NW and DL filed for Ch 11, so AA is automatically gonna seek concessions or file itself in the next four weeks." It ain't gonna happen.

AA may someday file for bankruptcy protection, and/or may seek wage cuts under the threat of Ch 11, but the odds of it happening in the next four weeks are ZERO.

 

[FWAAA]

FWAAA,

Just wondering if you off-hand know the differences for CH 11 before or after Oct 17. Most of us know about the well publicized executive bonus changes, but is there any other significant advantage to filing prior to Oct 17 other than the bonuses?

[post="301791"][/post]​

I know of at least three advantages to filing prior to October 17. Briefly, the changes include:

1. Shortens the period of exclusivity where only the debtor may propose a plan of reorg to 18 months. UAL has had extension after extension, and is now at about 33 months.

2. Shortens the time to make decisions on rejected aircraft to 210 days. Again, UAL has had lots more time to reflect on which airplanes it keeps and which it ultimately tells lessors and creditors to take back.

3. Prohibits executive retention bonuses unless the exec can prove other job offers. For the losers in the executive suite, this is a downer. After all, every corporation has some slugs who couldn't find another job even at their brother in law's business. But some of the execs will be able to prove other job offers - and can still get the retention pay.

There are probably others - I don't practice BK law and have not studied the new law extensively.

For airlines that were on the brink - like DL and NW - I'm certain the October 17 deadline was an important consideration.

Wanna know who else may take advantage of Ch 11 prior to October 17? Contintental. CO has large debt repayments and some pension issues on the short term horizon that it may not be able to refinance or pay.

I hold no CO stock and would probably dump it if I did - at least until October 18. B)

I do hold some AMR.

Another reason I don't see AMR filing Ch 11? Its stock still has some value, and might be the currency of choice to help acquire NW. Filing Ch 11 would prevent any chance of AA buying NW and its China rights.

 

[Wretched Wrench]

I'll disagree on this, too. (Oh, the company I keep!) I don't doubt that AA would like to bk, but they can't do it now. They are just not bad enough off.

I believe one more change is that the company has to exit bk in 18 months after Oct 17.

 

[Bob Owens]

I disagree. Keep us informed on the non-existent bankruptcy threat, however.

[post="301773"][/post]​

Hmm, you could have made this same post in January of 2003. Within 60 days they claimed that they were "on the court steps".

 

[AMFAMAN]

I know of at least three advantages to filing prior to October 17. Briefly, the changes include:

1. Shortens the period of exclusivity where only the debtor may propose a plan of reorg to 18 months. UAL has had extension after extension, and is now at about 33 months.

2. Shortens the time to make decisions on rejected aircraft to 210 days. Again, UAL has had lots more time to reflect on which airplanes it keeps and which it ultimately tells lessors and creditors to take back.

3. Prohibits executive retention bonuses unless the exec can prove other job offers. For the losers in the executive suite, this is a downer. After all, every corporation has some slugs who couldn't find another job even at their brother in law's business. But some of the execs will be able to prove other job offers - and can still get the retention pay.

There are probably others - I don't practice BK law and have not studied the new law extensively.

For airlines that were on the brink - like DL and NW - I'm certain the October 17 deadline was an important consideration.

Wanna know who else may take advantage of Ch 11 prior to October 17? Contintental. CO has large debt repayments and some pension issues on the short term horizon that it may not be able to refinance or pay.

I hold no CO stock and would probably dump it if I did - at least until October 18. B)

I do hold some AMR.

Another reason I don't see AMR filing Ch 11? Its stock still has some value, and might be the currency of choice to help acquire NW. Filing Ch 11 would prevent any chance of AA buying NW and its China rights.

[post="301798"][/post]​

Thanks for the info....

So for a company like AA who does have a pretty good wad of cash on hand, the changes don't have as much effect on them. Looking at NWA and the lack of DIP financing going in(if this was reported correctly), as they plan to finance their own way out of BK, I figure this could be AA's next move. With early openers coming next April for the contracts and the APA President saying more concessions are coming in the paper, AA could use the wad of cash to finance themselves through BK if they don't get the same cuts that the BK carriers are getting, mainly the pensions. Granted the stock price is high right now but in Dec 2002, the stock did hit $8 a share.

Of course buying NWA would throw that theory out the window and the scabs to.

 

[PRINCESS KIDAGAKASH]

The parent company AMR may have 3.9 billion in cash, but what if AMR does a Frank Lorenzo? AA could be put into bankruptcy separate from AMR. You got to remember Lorenzo put Continental into bankruptcy even though Continental had over a billion in cash(worth probably three times that in today's dollars) on hand in 1983. Eastern was also bankrupted separate from Continental in 1989 even though they were both owned by Texas Air.

 

[aafsc]

The parent company AMR may have 3.9 billion in cash, but what if AMR does a Frank Lorenzo? AA could be put into bankruptcy separate from AMR. You got to remember Lorenzo put Continental into bankruptcy even though Continental had over a billion in cash(worth probably three times that in today's dollars) on hand in 1983. Eastern was also bankrupted separate from Continental in 1989 even though they were both owned by Texas Air.

[post="302014"][/post]​

I believe that long after EAL's bankruptcy and shutdown, that Texas Air Corp. was held responsible for some of EAL's obligations because it was the parent company that took many assets (planes, gates, slots, and the SODA computer system) from EAL and placed them at CO and Texas Air. AMR is a holding company for AA, Eagle, AMR investment services and numerous smaller companies. So if AA were to file, I don't think it would make much difference. When UAL, US, and NW filed, the parent companies and all their subsidiaries were included. While the business environment in this industry is getting worse, AA still has quite a few alternatives to raise cash. However, some of these alternatives will only drive up interest expenses making it even harder to make a net profit.

 

[High Speed Steel]

I doubt concessions will be in order. More likely the opportunity to advance position in the Market. There will be allot of opportunities available for the fittest

 

[Boomer]

AA could only make BK by OCT 17 through a massive payment to the PBGC of the amount they are underfunded: almost $3 Billion Dollars.

If that was done, almost no one in Congress could say boo because they are too busy pontificating about the current funding status of airline pensions.

 

[coolflyingfool]

AA may try to get some concessions, but no CHPT 11. The company would not risk having to make payouts with almost $4BB in the bank. I think AA and CO are safe, but anything can happen. Just my thoughts............