part of the incentive for US to pursue the AA merger was precisely because much of the debt that US took on = or refinanced in BK - is coming due in the next few years. It is not realistic for US to have to repay so much of the debt that is coming due in the next few years so close to the merger or at the very time that AA's business plan involves taking on tens of billions of dollars in new debt as part of their fleet modernization.
There will be a stark divide in the US airline industry; some carriers are reducing debt and deleveraging their balance sheets while the new AA and UA will be taking on tens billions of dollars of new debt in the next few years.
It doesn't take too much to realize that debt payments are a cost that some carriers will have to a much greater degree than others and that there are clear differences in the success of some companies and even countries based on the level of debt they carry.
Overall, long-term, you're probably correct. Thing is, the cost of money has never been cheaper than it is right now. Interest rates are at historic lows. If you borrow billions at variable rates, then obviously you're vulnerable in the case of a slowdown or higher interest rates. But if you can sell bonds or lease planes at relatively low fixed rates for 10-20 years, this might be the borrowing opportunity of a lifetime. And if management at UA and AA guess wrong and debt service is an unsustainable burden, then so what? Chapter 11 is always an option.
AA's 2011 Ch 11 filing wasn't necessitated because of crushing debt. AA was not running low on liquidity and was able to service its debt and pay/refinance its debts as they came due. As the AA employees have loudly lamented over the past 17 months, this Ch 11 was primarily to force more efficient, lower-cost labor contracts. Sure, some airplane debt was renegotiated but debt relief wasn't the focus. AA's POR proposes paying all unsecured claims in full and even provides a small dividend to the existing equity holders - unprecedented in airline Ch 11 cases. Of course, that tells me that AA didn't shed enough debt - if the new equity is sufficient to pay everyone in full then creditors weren't harmed enough.
If new AA finds itself crushed by its debt load in a few years, it can always file another Ch 11 petition.
I've said it before - you can either buy fuel for old, inefficient planes or you can lease new planes with cheap money. The effect on the income statement is the same whether it's interest or fuel - both are subtracted in computing net profit or loss.
Fuel prices are highly volatile and right now, somewhat expensive, while generally, rates on money can be fixed for a period of years. Right now, AA's new plane lease payments on 738s are covered by the fuel savings and maintenance savings. Richard Anderson said the exact same thing about DL's 737-900ER order. DL has cornered the market on available fuel efficient 717s and MD-90s, so it's not as if AA could take the same path as DL on those ~100-120 relatively efficient used planes. With no real supply of 717s or MD-90s (beyond the ones that DL scooped up), that leaves AA with either buying far more fuel, at expensive prices for its older planes or leasing new planes.
It's similar to the gamble that people and utilities are making with solar panels. if electricity prices continue to escalate, then those solar panels on the roof will look like a brilliant decision. If electricity prices decline long-term, then those solar panels (like AA's new fuel efficient fleet) will look like an expensive luxury.
When all is said and done, AA may spend $1 billion or more on new plane lease payments every year above and beyond what DL spends. But if AA's fuel costs are $1 billion less than DL's fuel costs, then I don't see a dire future for AA. I don't see a big disadvantage. A gamble? Sure. Airline executives gamble all the time on the future.