Bigo747 From , joined Dec 1969, posts, RR: Posted (10 years 10 months 1 week 4 days 5 hours ago) and read 2963 times:
The World's largest airline, American Airlines and it's parent AMR Corp. is currntly burning $5 million/day with little or no relief.
Industry Experts are now very nervous that it could ended up like it's rival UAL and Us Airways: entering bankruptcy court.
Unlike UAL, AMR's financial problem is very simple: Money takes from pax downs sharply, and the company unable to cut expenses fast enough to keep up.
...For the moment, the company's saving grace is the $2 billion in unrestricted cash it has on hand. But even chief executive Don Carty has repeatedly said that American, which lost a record $3.5 billion in 2002, is operating at a level that is "unsustainable."
Without combined savings of about $2 billion, or 25 percent a year, from its various labor groups, AMR "could be in bankruptcy by next winter, or even sooner," Neidl said...
AMR has been set up various of meetings with it's staff about the crisis. AMR's employee do not believe the airline has done much as it could without their help.
For instance, labor leaders remain unconvinced that the company followed through with a promise to shrink the size of management by 22 percent.
Another cruicial problem is whether employees agrees 3% salary raise this year.
There are only 2 "hopeful" scenario for AMR: either economy rebounds in 2003, or UAL collapses.
Besides the labour problem, War on Iraq is another focus. High fuel prices plus air travel declines could force UAL to collapse and sell its assets.
LH423 From Canada, joined Jul 1999, 6501 posts, RR: 55 Reply 3, posted (10 years 10 months 1 week 4 days 2 hours ago) and read 2799 times:
Nah! There was no regulation in the early-90s when PanAm and Eastern went belly up, and several airlines entered Chapter 11. There won't be one now, especially under a laisser-faire, Republican government. This is just the natural cycle for the airline industry. Every so often, there has to be a shakedown for the survival of the industry. It's economic Darwinism at its finest.
« On ne voit bien qu'avec le cœur. L'essentiel est invisible pour les yeux » Antoine de Saint-Exupéry
Cch362 From United States of America, joined Apr 2001, 147 posts, RR: 0 Reply 4, posted (10 years 10 months 1 week 4 days 2 hours ago) and read 2791 times:
I think the writing was on the wall for AMR when it lost $1.3 BILLION in the third quarter of 2002, generally the most profitable three months for airlines. Everyone was so focused on the United bankruptcy last autumn that American kind of slipped under the radar.
By the way, re-regulation would be a bAAd idea! Why regulate the industry to keep the weak players flying, whether they are the #1 and #2 airlines or an upstart. Let those airlines that cannot contain their costs fade away, and allow the more efficient ones to fill the void. The airline industry has proven to be flexible to endure the short-term pain of any closure no matter how big.
The American traveling public will be better off to let things take care of themselves.
Danialanwar From Switzerland, joined Mar 2001, 421 posts, RR: 1 Reply 6, posted (10 years 10 months 1 week 3 days 22 hours ago) and read 2694 times:
Can anybody tell me why these airlines are unable to shrink their network. Axe very unprofitable routes (roughly said where parking an a/c in the desert incurs less losses than operating it) and/or cut frequencies without going chapter 11. I mean if you produce above demand and sell at or below cost, then losing milions of dollars comes naturally, doesnt it?
Best Business Class: Royal Brunei. Best Economy: Singapore Airlines. First: please send money first!
Trvlr From United States of America, joined Feb 2000, 4430 posts, RR: 23 Reply 7, posted (10 years 10 months 1 week 3 days 18 hours ago) and read 2552 times:
LHR423: Pardon me for going out on a limb here, but I believe PanAm and Eastern were nowhere near as big when they went bankrupt (and subsequently bust) as American and United are now. Therefore, I think there would be a much bigger impact on the nation's air transportation system if things go from bad to worse.
However, I don't have any figures to back me up, so I may be wrong!
Cch362 From United States of America, joined Apr 2001, 147 posts, RR: 0 Reply 9, posted (10 years 10 months 1 week 3 days 14 hours ago) and read 2338 times:
Airlines cannot just shrink on demand because they have contractual agreements with various suppliers, including labor (i.e. they cannot dismiss anyone at will). That is why these companies must go down the bankruptcy route if they want to make significant changes. The court has the role in facilitating the renegotiation of contracts and agreements that ultimately alters the way company does business.
PSU.DTW.SCE From United States of America, joined Jan 2002, 7181 posts, RR: 29 Reply 11, posted (10 years 10 months 1 week 3 days 11 hours ago) and read 2176 times:
How many more of these articles are we going to see, its as if some now-it-all journalist spits another one of these out every day without any new information.
Cutting routes, or known as "shrink to profitability" isn't as easy as it sounds. Its especially more difficult with a network carrier as cutting feed from a hub reduced connecting traffic onto other flights. The airline industry requires enormous amounts of fixed costs. Many aircraft are leased, and these leases simply can't be terminated, so regardless if they are parked or not, lease payments still must be made. Gate space must still be leased, and supplier contracts honored. Sometimes it makes more sense to keep a money-losing routes as cuts would make loses even worse. The biggest costs in the airline industry...1)Labor 2) Fuel Can't do a whole lot about the price of fuel.
Speedport From United States of America, joined Sep 2001, 284 posts, RR: 0 Reply 14, posted (10 years 10 months 1 week 3 days 5 hours ago) and read 1956 times:
When people say UAL will be the first casualty of the pending war, I think what they mean is they want UAL to become a casualty.
For we know that the whole airline industry groaneth and travaileth in pain together until now. And not only they, but ourselves also, which hold the answer to overcapacity, even we ourselves groan within ourselves, waiting for the final outcome. For the entire industry wishes to be saved by this hope: but hope that is seen is not hope: for what the industry seeth, why does it yet hope for? But if we hope for that we see not, then do we with patience wait for it.
Boeingfan From United States of America, joined Aug 2001, 385 posts, RR: 1 Reply 15, posted (10 years 10 months 1 week 3 days 3 hours ago) and read 1882 times:
Not to panic. It will work out.
AA will get the cost concessions from labor, but not in the amount that has been published (USD1.8Bil./year.) Improved productivity from all work groups by 31MAR03. Reduced capacity, out sourcing, AAdvantage loyalty program and some fuel hedging will all keep AA flying for the next century or so. They do have cash avail. (USD2Bil.) Their staff want to keep a paycheck too.
If war breaks out, look at another gov't bailout for the USA airlines in the form of subsidies for airport access, fuel costs and security.
When/if UA goes to Chptr. 7 (liquadation,) then the industry will pick up the slack, and AA stands to gain the most UA market share with its hub in ORD. AA will hire alot of former UA personel. Airfares will become more rational (higher) with fewer seats chasing fewer discounts.
AA eventually will really expand in 2005, and the low cost carriers will just be a small blip on the radar and distant threat. Next AA hub, DEN. The industry will come out of this much stronger, with fewer USA carriers, four to five majors, and very profitable.
Subjective value judgement only. Not to be taken as fact or forecast of industry market performance.
Ual777contrail From , joined Dec 1969, posts, RR: Reply 17, posted (10 years 10 months 1 week 3 days 1 hour ago) and read 1853 times:
you need to lay off the chronic, there is no way AA would or could ever take most or all of Ua's Assets. Not only doesn't AA have the money to buy all, or most of our assets, but in my opinion the government would NEVER let AA be that big. If AA ever got all or most of UA'S stuff then WN,DL,CO,HP and all the others wouldn't stand a chance.
another thing is AA has a long and hard road to go down right now, they need money from labor. There is a mirror pattern that you folks at AA and the rest of the country are seeing, and that is exactly what went on at UA. We had the cash for a little while and our management team wasted all the time and energy, stumbling over dollars to pick up nickels and dimes. If there is war with Iraq, or I should really say "when" it will be quick and the government will in fact help out the majors. UA Will be back, and maybe not as strong as before. But remember this post, AA is going to file for chap. 11 by June. But hey I am also responding to a pro-AA post, and well I am a fan of UA so what can I expect? Not much.
Cch362 From United States of America, joined Apr 2001, 147 posts, RR: 0 Reply 18, posted (10 years 10 months 1 week 3 days ago) and read 1817 times:
I just don't think that a UA collapse could save AA. American's problem is not market reach, but costs. It is still having problems digesting the TWA purchase, and it is probably correct to say that American needs some serious route reductions of its own, not to say labor concessions.
If American somehow gets a hold of United's coveted Pacific routes, or all of Chicago, those will not make it profitable overnight. It will be just another bloated airline taking over, like a hippo passing the baton to a walrus in a race against dolphins.