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AA Bankrupt In 2003;UA Bye-bye If War Lasts Long  
User currently offlineBigo747 From , joined Dec 1969, posts, RR:
Posted (13 years 2 months 4 weeks 20 hours ago) and read 3772 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.

3rd problem is the low-cost carriers.

For full article (not in my own words):

18 replies: All unread, jump to last
User currently offlineHlywdCatft From United States of America, joined Jan 2001, 5321 posts, RR: 6
Reply 1, posted (13 years 2 months 4 weeks 20 hours ago) and read 3759 times:

So in other words there is a battle in Chicago. The AA employees are hoping UA goes belly up so they can keep their jobs.

User currently offlineTrvlr From United States of America, joined Feb 2000, 4430 posts, RR: 19
Reply 2, posted (13 years 2 months 4 weeks 20 hours ago) and read 3755 times:

Anyone see re-regulation on the horizon?

Aaron G.

User currently offlineLH423 From Canada, joined Jul 1999, 6501 posts, RR: 53
Reply 3, posted (13 years 2 months 4 weeks 16 hours ago) and read 3608 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
User currently offlineCch362 From United States of America, joined Apr 2001, 147 posts, RR: 0
Reply 4, posted (13 years 2 months 4 weeks 16 hours ago) and read 3600 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.

User currently offlineAA717driver From United States of America, joined Feb 2002, 1566 posts, RR: 13
Reply 5, posted (13 years 2 months 4 weeks 16 hours ago) and read 3595 times:

The senior management and "consultants" will walk away from the smoking wreckage with tens of millions of dollars saying "tsk, tsk, if only the employees had made more of an effort to make this work".

I'm busy telling my kids to become lawyers--they win no matter what.TC

FL450, M.85
User currently offlineDanialanwar From Switzerland, joined Mar 2001, 421 posts, RR: 0
Reply 6, posted (13 years 2 months 4 weeks 13 hours ago) and read 3503 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!
User currently offlineTrvlr From United States of America, joined Feb 2000, 4430 posts, RR: 19
Reply 7, posted (13 years 2 months 4 weeks 9 hours ago) and read 3361 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!

Aaron G.

User currently offlineGreg From United Kingdom, joined May 2005, 0 posts, RR: 0
Reply 8, posted (13 years 2 months 4 weeks 8 hours ago) and read 3303 times:

AA717driver....that's what my parents told me.
They were right.
No matter condition a company is in....they will always need representation.

(however, I don't think you meant it in a 'good' way...).

User currently offlineCch362 From United States of America, joined Apr 2001, 147 posts, RR: 0
Reply 9, posted (13 years 2 months 4 weeks 5 hours ago) and read 3147 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.

User currently offlineAA717driver From United States of America, joined Feb 2002, 1566 posts, RR: 13
Reply 10, posted (13 years 2 months 4 weeks 4 hours ago) and read 3107 times:

Greg--It's not like I'm telling my kids to join the Mafia Big grin. I'm trying to talk my wife into going to law school right now--she's the only one who has the GPA to get in.TC

FL450, M.85
User currently offlinePSU.DTW.SCE From United States of America, joined Jan 2002, 8116 posts, RR: 26
Reply 11, posted (13 years 2 months 4 weeks 1 hour ago) and read 2985 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.

User currently offlineTWFirst From Vatican City, joined Apr 2000, 6346 posts, RR: 51
Reply 12, posted (13 years 2 months 4 weeks 1 hour ago) and read 2972 times:

Well, here's another story on the topic that appeared today:


An unexamined life isn't worth living.
User currently offlineAA717driver From United States of America, joined Feb 2002, 1566 posts, RR: 13
Reply 13, posted (13 years 2 months 3 weeks 6 days 22 hours ago) and read 2851 times:

And when they emerge, they will have shed debt, excess employees(me) and will take the industry by storm!TC

P.S.--Sorry, I couldn't resist Big grin

FL450, M.85
User currently offlineSpeedport From United States of America, joined Sep 2001, 284 posts, RR: 0
Reply 14, posted (13 years 2 months 3 weeks 6 days 20 hours ago) and read 2765 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.

Just ask those over at AMR.

User currently offlineBoeingfan From United States of America, joined Aug 2001, 385 posts, RR: 1
Reply 15, posted (13 years 2 months 3 weeks 6 days 17 hours ago) and read 2691 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.


User currently offlineTwaneedsnohelp From , joined Dec 1969, posts, RR:
Reply 16, posted (13 years 2 months 3 weeks 6 days 16 hours ago) and read 2666 times:

If UA emerges from bankruptcy restrucutred, AA, DL, CO, NW will all have to file to lower their costs and compete.

Theres about a 60% chance UA will liquidate anyway. US' survival rate is higher.


User currently offlineUal777contrail From , joined Dec 1969, posts, RR:
Reply 17, posted (13 years 2 months 3 weeks 6 days 15 hours ago) and read 2662 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.

ual 777 contrail

User currently offlineCch362 From United States of America, joined Apr 2001, 147 posts, RR: 0
Reply 18, posted (13 years 2 months 3 weeks 6 days 14 hours ago) and read 2626 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.

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