PRINCESS KIDAGAKASH said:
The $3.5 billion is already gone. In fact,it does not exist as long as AMR owes 25 billion in debt. All that $3.5 billion is "feel good" money to lure dummies into buying worthless AMR stock or luring banks to loan AMR more money to spend on new seats and terminals
[post="304244"][/post]
How much do you owe on your house? Is it more than you have in your savings account? For most people the answer is yes.
When you took the loan was it more than you annual earnings? For most people the answer is Yes.
So AMR owes $25 billion and they have an annual revenue of around the same. Big deal.
One thing you have to remember is that unlike people, companies are immortal. They dont have to pay off their debts in order to retire. So they can and usually do say in debt forever. Thats how banks make their money. If the airlines did not borrow money banks would lose a big source of revenue.
Banks love when companies borrow money, it makes them a limited risk partner, skimming off the profits, even when there arent any.
So oweing out more than you have in cash is not such a bad thing for a corporation, in fact it might ward off a hostile take over. As long as you have the revenue to service the debt you are OK. With over $20 bill in revenue/year oweing out $20 bill over the next several years is not in itself that bad.
The banks were behind our screwing. Along with the airlines they put in unrealistic covenants such as the one AMR had where they had to maintain $1billion in cash. Have you ever heard of anything like that? Thats like the mortagage company saying that you have to maintain $100,000 in cash or they will call back your mortagage. They would not do it because then nobody would take mortgages and what would the banks do with all that money? You have to remember that the banks are paying interest on the money they have so sitting on it does them no good, it costs them.
I think the company deliberatey sought those terms so they could claim that they were about to go BK even though they had over $1billion in cash. It sounded good, nobody questioned it, and they got away with it! The banks had nothing to lose by putting in those covenents. In the meantime we lowered the bar so low it not only kept UAL and USAIR in BK but pushed Delta and NWA in too.
What that covenent did was allow AMR to hide $1billion in plain sight. Combined with the "We lost $3.5 billion", "We owe over $20 billion" , and threatening to cut union officers off company payroll it allowed AMR to drastically cut wages to the point where other carriers , even in BK have still not caught up to AMR.
It put AAs labor costs per worker lower than SWA and if we were to compare AAs costs by the number of years with the company even lower than Jet Blue.
