Pilots Warn of American Bankruptcy


Aug 20, 2002
Pilots'' Analysis Shows American Airlines Could Be Forced Into Bankruptcy by May
DALLAS (AP) -- AMR Corp., parent company of American and American Eagle airlines, could be forced into bankruptcy as soon as May, its pilots'' union warned.
An analysis of AMR''s finances by the Allied Pilots Association found the Fort Worth-based company has just three months'' worth of cash reserves.
American Airlines pleaded with employees earlier this month to accept steep cuts in wages and benefits to save $1.8 billion annually. The pilots'' analysis concluded that might not be enough.
Realize that the $1.8 (billion) is a minimum figure, a posting on the union''s Web site says. There is no guarantee that AMR won''t ask for more. AMR states the alternative is bankruptcy.
American spokesman Bruce Hicks said the airline would not comment on specifics of the union''s findings, but said talks with unions were productive.
They understand the sense of urgency that we need, he said.
Most major airlines have struggled financially since the Sept. 11 terror attacks and two -- United Airlines and US Airways -- have sought bankruptcy protection.
AMR chief financial officer Jeff Campbell said in January that American was losing about $5 million a day and would continue to do so during the winter, the weakest part of the travel season. Based on that, the pilots calculate American would need to file for bankruptcy May 25.
The union said it hopes to take only two months to reach a contract, present it to members and obtain approval. If talks take much longer, the union said, American''s chances of filing for bankruptcy are 100 percent.
American''s flight attendants and ground workers have contracts in place that make them among the best paid in the industry. Contracts for the Association of Professional Flight Attendants and the Transport Workers Union are up for revision in 2004.
The Transport Workers Union began intensive contract discussions this week. The flight attendants'' union said they would also begin discussions if the situation becomes urgent
Sadly, it may be in AMR's short term plan's to declare bankruptcy as soon as the petroleum war starts in early March. Analysts already predict, air travel will just about disappear.

Up to 50% could hit the streets, with the remaining earning 50% less than current levels. Call it the 50/50 plan, that's exactly what Frank Lorenzo called CAL's strategy, and look where CAL is at now.
That's what I heard from a pilot yesterday. AA wants them to fly more hours which would reduce their numbers. But I wonder what negotiations would affect their pensions inlight of the US Air dilemma.
Too little, too late. The Company's $2 billion cost reductions they have targeted don't fully kick in until 2005. So there is really no reason for the unions to be negotiations for concessions with the thought of avoiding BK. It's too late. My vote is still "NO".
Hopeful, (let's all be just that) is that UAL is cannibalized in BK court, and someone in Saddam's inner circle does the right thing soon.

Bags; you're vote may be NO, but our vote to send you to Bagdad as a human shield is unanimously; YES.
American Airlines, Union Deny Claim Firm May Go Bankrupt

Associated Press

DALLAS -- Executives of American Airlines, the world's largest carrier, are racing against time as they seek concessions from employee unions and help from Congress to stave off bankruptcy.

A local official at American's pilots union said the airline could be forced into bankruptcy before June. That assessment was denied by the union president and the company, but it focused new attention on the prospect of another major airline seeking Chapter 11 protection.

Shares of American Airlines' parent company, AMR Corp.(NYSE:AMR) (AMR), tumbled fell 26 cents to close at $2.58 on the New York Stock Exchange Wednesday.

American had already raised the possibility for bankruptcy this month when it asked employees for $1.8 billion in annual concessions, but company officials have never put a timetable on a Chapter 11 filing.

Jeff Sheets, a board member of the Allied Pilots Association, based his analysis on the company's daily cash burn rate of $5 million and on the assumption that American would not operate with less than $1 billion. At the end of the fourth quarter, the company said it had $1.9 billion in unrestricted cash.

The pilots' association said Wednesday it did not endorse Mr. Sheets' estimate -- first posted on a private section of the union's Web site -- and a spokesman for American called it "inaccurate."

That said, nobody is denying that bankruptcy is a real possibility for the carrier, which has been stung by the decline in spending by business travelers.

Analysts say American has enough cash to last until late summer, assuming passenger traffic picks up in the spring and that a possible war in Iraq doesn't cause leisure travelers to stop flying.

American, which has a history of poor labor relations, has opened its books to the unions to persuade them to accept the wage concessions proposed earlier this month. American wants about one-third of the concessions to come from pilots.

Consultants and bankers working for the unions are still reviewing the records, but they say it doesn't look good.

"There is a very real possibility of bankruptcy," said John Darrah, president of the pilots union, which initially was skeptical of American's claim of financial distress.

Mr. Darrah, who dismissed Mr. Sheets' prediction as a "back-of-the-envelope" calculation, said he would like to reach an agreement with the company quickly - before a bankruptcy filing - in order to protect jobs. If American were to file for bankruptcy protection, creditors and company management would likely have much more power to demand costs cuts.

"We have signaled our willingness to explore cost savings with American Airlines management," Mr. Darrah said.

Leaders of unions representing pilots, flight attendants and mechanics have joined company officials to lobby for relief from federal fees and taxes for security and other purposes. They met last week with Sen. Kay Bailey Hutchison ( R., Texas) and several House members from Texas, but Mr. Darrah said they got no indication that immediate help is on the way.

American's chairman and chief executive, Donald J. Carty, warned last week that things could get worse for the Fort Worth-based carrier if there is war with Iraq, which could reduce travel and raise jet fuel prices. Echoing comments made by other airline executives, Mr. Carny said the industry would need government help to survive if war breaks out with Iraq.

American and other U.S. carriers have struggled in the past two years with the slumping economy, reduced spending by business travelers and higher security costs in the wake of the 2001 terrorist attacks. Those factors helped push United Airlines and US Airways into bankruptcy last year.

Ray Needle, an airline analyst with Blaylock & Partners, said American could also forestall bankruptcy by selling assets such as the American Eagle commuter airline, but that, without major concessions from labor, a Chapter 11 filing was inevitable.

American spokesman Bruce Hicks declined to discuss the timing of a possible bankruptcy filing.

On Wednesday, Mr. Carty met with representatives for the Association of Professional Flight Attendants, who -- like the pilots and ground workers -- have indicated a willingness to negotiate cost-saving measures.

Michael Boyd, an aviation consultant in Evergreen, Colo., who has worked for the pilots' union, said the unions' agreement to consider concessions was more significant than estimates of when American might file for bankruptcy.

"You're looking at an employee group that is fixing to pull together, and that's good for American," Mr. Boyd said.

Before seeking concessions from labor, American said it cut other costs by $2 billion a year, mostly by retiring planes and changing its flight schedule. Company officials said they needed twice those savings to compete with low-cost carriers such as Southwest Airlines.
***** ***** ***** ***** ***** ***** ***** ***** *****​
Is deNial now a river in Dallas?
On 2/27/2003 7:28:51 AM Hopeful wrote:

I wonder how much the recent $10.00 fare increase will offset the losses!

Last I saw we were flying about 268,000 pax a day, so 2.68M. However rising oil prices could offset some of that. AA is somewhat hedged (I think 40%), but it still hurts.
Anyone who actually believes AMR's chances of bankruptcy are only 25% should be buying as much AMR stock as they could stomach.

If you put $10,000 in AMR, you are risking $10,000. But the upside could be 4 times your money if they stay out of BK and get the needed concessions, and the war ends quickly.

Personally, I believe the risk of BK is much more than 25%.