S.1113

[WXGuesser]

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On 4/11/2003 9:01:59 AM Hopeful wrote:

Since the pro-T/A yes voters are putting all their faith into S.1113. I would like to ask you this. If AA secures all its concessionary agreements with its unions AND still files for bankruptcy, where do you suppose the further costs reductions come from? Since the court will respect S.1113, where do the further cuts come from? The selling of assets and routes, that''s where they come from. That translates into further layoffs.

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Hopeful:

In that situation, I believe a lot of additional cost reductions will come from renegotiations of things like vendor contracts, aircraft leases (especially for all those aircraft parked out at places like MHV), etc. That''s the reason I have stated all along that AA will likely go into Chapter 11 even if we do approve the concessions. But instead of being a process of further brutalizing the employees, it would likely be a pre-packaged kind of deal to help reduce the massive debt load.

In that case it is unlikely to result in numerous additional layoffs.

TANSTAAFL

 

[Hopeful]

I just don''t buy it!

 

[Hopeful]

Since the pro-T/A yes voters are putting all their faith into S.1113. I would like to ask you this. If AA secures all its concessionary agreements with its unions AND still files for bankruptcy, where do you suppose the further costs reductions come from? Since the court will respect S.1113, where do the further cuts come from? The selling of assets and routes, that''s where they come from. That translates into further layoffs.

 

[Oliver Stone''s Apprentice]

The creditors and court won''t allow selling assets and routes for less than fair value, so it only works if you have someone who wants them or can afford them. There aren''t too many other airlines looking to buy up routes (except perhaps LHR, and its doubtful that the UK would permit those authorities to be swapped again), and used aircraft are a dime a dozen right now.

I''ve said this a few times -- look at the Hawaiian bankruptcy. They''re using it to reduce aircraft lease rates, ground facility rents, supplier contracts, and restructure debt.

With one exception, none of those items above involve furloughs or eliminating jobs.

The single exception where we could see furloughs are aircraft leases. If we find ourself in a position where we can''t renegotiate leases on some aircraft, they go back to the lessor. Since the market for used aircraft sucks right now, that probably won''t happen. Given the choice of lowering payments to market rates, or being stuck with an aircraft that they now have to find a new owner for, lessors have traditionally opted for lowering payments.


E

 

[limit]

It is my understanding that AA and all the Unions have stated
repeatedly that if one of the contracts is turned down,
the company will file for bankruptcy.
In such a case, we are told; the debtors in possession will require
an additional 500million in wage concessions.
AA stated that if the contracts are accepted the company will not
ask for additional cuts from the employees if it is forced
into bankruptcy anyway. The Unions concur.
Question:
If the DIP require 2.3 billion in concessions if the contracts do not pass and AA files,
why will they require 1.8 if they pass and AA still files?
Even if AA is true to its word, in case of bankruptcy the DIP is setting the terms.
And the terms as stated by AA are:

In bankruptcy the DIP requires 2.3 billion in concessions.

The way Carty is talking lately, AA will file regardless of the vote outcome.
In such a case, I do not see how concessions will be less than 2.3billion
because of the vote outcome.
Unless of course you believe that the DIP will gift 500million to us because we voted yes.

 

[WXGuesser]

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On 4/11/2003 1:27:20 PM limit wrote:

It is my understanding that AA and all the Unions have stated
repeatedly that if one of the contracts is turned down,
the company will file for bankruptcy.
In such a case, we are told; the debtors in possession will require
an additional 500million in wage concessions.
AA stated that if the contracts are accepted the company will not
ask for additional cuts from the employees if it is forced
into bankruptcy anyway. The Unions concur.
Question:
If the DIP require 2.3 billion in concessions if the contracts do not pass and AA files,
why will they require 1.8 if they pass and AA still files?
Even if AA is true to its word, in case of bankruptcy the DIP is setting the terms.
And the terms as stated by AA are:

In bankruptcy the DIP requires 2.3 billion in concessions.

The way Carty is talking lately, AA will file regardless of the vote outcome.
In such a case, I do not see how concessions will be less than 2.3billion
because of the vote outcome.
Unless of course you believe that the DIP will gift 500million to us because we voted yes.


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Uh, no. Try following this:

If the company were to file for bankruptcy today, they would need $2.3 billion in concessions to GET the DIP financing they need to get through the bankruptcy.

If they get the concessions, they may still need to file for Chapter 11, but it would likely be the "pre-packaged" where the DIP lenders would get their money back from the particular lease renegotiations, vendor contract restructuring, etc. that AMR was unable to do outside of bankruptcy but would be able to do in CH. 11. They would also need a less DIP funding, therefore the less-draconian requirements. They would have a much lower cost structure going in, so it is less of a risk for the DIP lenders.

Clear as mud?

TANSTAAFL

 

[Oliver Stone''s Apprentice]

My guess is it''s a simple matter of risk assessment. Banks do not like unknowns. Have you ever tried to qualify for a loan with someone who was self-employed? Banks sometimes require larger down payments or raise interest rates slightly because the future earnings for someone self-employed are an unknown.

Without signed agreements, the banks have to assume that the unknown increases the potential for defaulting on the DIP repayment.

UAL has to meet increasingly aggressive EBITAR hurdles. Had they been able to get their agreements lined up before filing, those hurdles might not have been set as aggressively, because the labor cost would have been a known factor as opposed to an unknown factor.

 

[UAL_TECH]

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On 4/11/2003 9:01:59 AM Hopeful wrote:

Since the pro-T/A yes voters are putting all their faith into S.1113. I would like to ask you this. If AA secures all its concessionary agreements with its unions AND still files for bankruptcy, where do you suppose the further costs reductions come from? Since the court will respect S.1113, where do the further cuts come from? The selling of assets and routes, that''s where they come from. That translates into further layoffs.

----------------​

S 1113 letter did not help the USAir Employees very much.
What is the validity of an instrument that cannot be sustained?
Just more eye-candy.
Good Luck to us ''ALL''!!!

IMHO

Take Care,

UAL_TECH

 

[airlineorphan]

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On 4/11/2003 9:01:59 AM Hopeful wrote:

Since the pro-T/A yes voters are putting all their faith into S.1113. I would like to ask you this. If AA secures all its concessionary agreements with its unions AND still files for bankruptcy, where do you suppose the further costs reductions come from? Since the court will respect S.1113, where do the further cuts come from? The selling of assets and routes, that''s where they come from. That translates into further layoffs.

----------------​

I wish all of you well at American. Over here at US Airways, we can assure you that S.1113 letters are pretty much worthless. It may be difficult for management to violate them directly via the BK judge, but there are a million ways to skin that cat.

A stroll down memory lane:

In the Spring, US Airways management came to employees and said: Give us $6.5 Billion over the next 7 years, and it will keep us out of Chapter 11. Negotiate now, and we''ll give you S.1113 letters too!

All unions (except IAM and CWA) ratified by August 9th (give or take a day) 2 days later, management filed Chapter 11 (publicly citing problems renegotiating leases as the reason, NOT IAM and CWA negotiations). Eventually everyone had signed concessions unheard of in the history of the airline industry (effectively lowering the bar for everyone.... sorry folks). But hey, we had S.1113 letters and management had told us they didn''t need to get anything more from us!

Then 2 days before Thanksgiving, management kicked another 2500 employees to the curb and made clear their strategy for squeezing another $1.4 Billion from us: Terrorize the employees with threats of liquidation. They didn''t have to go to the court and tear up any S.1113 letters. They just had their DIP finance guy, Dave Bronner (you know he''s crazy, cuz he invested pension funds in an airline!) threaten to pull the financing if employees didn''t give in to whatever the company wanted. And give we did. Again. And in a sloppy hurried fashion.

Then management pulled the liquidation threat again and dumped the pilots pension fund (an experience which I understand has been used as fear leverage against y''all).

Now that we''re out of Chapter 11, and have given and given, management has taken a stance that our contracts are toilet paper and is trampling them. You may hope that your loyalty in giving will be rewarded, but I assure you, it only makes management smell blood and now we''re in the feeding frenzy, which has infected management throughout the industry.

Whichever way y''all vote, it will be a rough ride. I think you know how I would vote if I were at AMR, but it''s not my place to tell you how to vote. However you decide, know that you will have to stand together strong and look after each other in the midst of the storm which is now bearing down upon you.

In solidarity,
-Airlineorphan

 

[Bob Owens]

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On 4/11/2003 10:34:55 AM eolesen wrote:

The creditors and court won''t allow selling assets and routes for less than fair value,


Then the creditors and the courts feel the same way as the mechanics-We Will not sellour assets for less than fair value.​

 

[limit]

EO,WX .
Everything the two of you said is clearly evident to all.
My questions arise from that.
If AA has a prepackaged deal lined up with banks and other parties
why is this not announced?
Even if the lenders and lease holders are not comfortable publicly announcing such agreements,
a slight hint by Carty that the wheels are set into motion for a prepackaged deal will go a long way
by providing everybody a small (very small) degree of reassurance.
We all understand the dangers AA faces regardless of the vote outcome.
The way Carty is talking, I get the distinct impression that he is having trouble reducing his costs
(other than labor) outside of the court system.
Even though you can say “this is due to uncertainty involving labor costsâ€￾, you only assume
the DIP will behave a certain way.
At no point has Carty ever stated that the DIP has made any promises.(other than the 500mill)
Both sides of the issue are trying to make valid points. But they are points in forecasting -if not palm reading-.
Even if you choose to bring history into play, while it is true that banks definitely prefer to secure better odds
when lending money, very often pre BK concessions mean absolutely nothing (US Air).
Just like a meteorologist once said.
Clear as mud.
Chose your poison, do what you feel is best for you, but nobody here is making a valid point. This is nothing but a lottery.
Maybe someone will be proven "right".He will be the one that got lucky rolling the dice.
Good luck to all.

 

[WXGuesser]

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On 4/13/2003 8:36:35 PM limit wrote:

EO,WX .
Everything the two of you said is clearly evident to all.
My questions arise from that. If AA has a prepackaged deal lined up with banks and other parties why is this not announced?
Even if the lenders and lease holders are not comfortable publicly announcing such agreements, a slight hint by Carty that the wheels are set into motion for a prepackaged deal will go a long way by providing everybody a small (very small) degree of reassurance. We all understand the dangers AA faces regardless of the vote outcome. The way Carty is talking, I get the distinct impression that he is having trouble reducing his costs (other than labor) outside of the court system. Even though you can say “this is due to uncertainty involving labor costs”, you only assume the DIP will behave a certain way. At no point has Carty ever stated that the DIP has made any promises.(other than the 500mill) Both sides of the issue are trying to make valid points. But they are points in forecasting -if not palm reading-.
Even if you choose to bring history into play, while it is true that banks definitely prefer to secure better odds when lending money, very often pre BK concessions mean absolutely nothing (US Air. Just like a meteorologist once said. Clear as mud. Chose your poison, do what you feel is best for you, but nobody here is making a valid point. This is nothing but a lottery.
Maybe someone will be proven "right".He will be the one that got lucky rolling the dice.
Good luck to all.

----------------​

Limit:

I think the reason that a pre-packaged deal (if one exists) has not been announced is more having to do with AA''s penchant for playing things "close to the vest" through their recent history. Did anybody have even the slightest clue about the TWA acquisition before it happened? I know that one caught me at a complete jaw-dropping surprise, as none of the "experts" had even suggested it.

I think Carty''s recent comment about perhaps having to go into bankruptcy even with the labor reductions may have been the hint you asked for.

I agree that all of us on all sides of this issue are merely speculating. But I think that speculation based on the concept of what would be smart business practices would be more indicative of what will actually happen.

And, after all, my profession is all about forecasting!
{that was meant to inject some humor}

I agree with you that this is rolling dice. But I''d rather roll the dice myself than let someone else (the judge) roll them for me. But each person does need to decide what is best for themselves.

TANSTAAFL

 

[limit]

Like you said: "Clear as mud".