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More Cutbacks Possible At AA  
User currently offlineAa777flyer From , joined Dec 1969, posts, RR:
Posted (10 years 1 week 6 days 8 hours ago) and read 3763 times:

I was talking to a friend that is still at AA, he heard directly from a level 5 manager that unless oil prices drop to below $40 a barrell by February, AA will seek a 20% across the board paycut, along with more layoffs or it may be forced into Chapter 11. This is all due to the spike in oil prices. Too bad. I hope it is not really true.

20 replies: All unread, jump to last
 
User currently offlineDfwRevolution From United States of America, joined Jan 2010, 984 posts, RR: 51
Reply 1, posted (10 years 1 week 6 days 7 hours ago) and read 3695 times:

I was talking to a friend that is still at AA, he heard directly from a level 5 manager that unless oil prices drop to below $40 a barrell by February

If that's true, then I can almost all but garuntee it. Ivan really screwed up oil production and is one of the main reasons prices are so outrageously high right now. Even as the Gulf production comes back online soon, the oil made off-shore and refined at the coast doesn't hit the system immediatly.


User currently offlineCkfred From United States of America, joined Apr 2001, 5273 posts, RR: 1
Reply 2, posted (10 years 1 week 6 days 7 hours ago) and read 3644 times:

There are several variables to consider before AA goes looking for more paycuts.

1. The status of US. A number of "experts" think US will be gone in 6 to 8 months. If that does happen, every legacy airline gets some leverage in setting fares, because of the reduced capacity in the system. In addition, AA will have some opportunities to step into areas where US has had significant market share.

2. The status of UA. If UA doesn't come up with an plan to exit Chapter 11 soon, the judge will allow other interested parties to offer plans. I don't think UA will wind up like US, but it could become a significantly smaller carrier, giving AA some opportunities.

3. Although T. Boone Pickens said last week that oil will hit $60 before we see $40, and that we may never see $35 again, I don't think oil can stay at these prices for a long period. Too many business dependent on oil, worldwide, will start trying to reduce consumption, which should eventually lead to lower prices.

4. If oil does remain high, then the likes of B6, FL and F9 will have to raise fares. Their margins are being hurt by oil prices, and they will have to raise fares, if they wish to maintain cash flow.


User currently offlineAa777flyer From , joined Dec 1969, posts, RR:
Reply 3, posted (10 years 1 week 6 days 7 hours ago) and read 3625 times:

CkFred-
While a US shut down would be sad for the current US employees, most industry analyst think it will do little to help the other US carriers. US has too little of the domestic capacity to make a difference.
If AA had last years oil prices, they would be fairly profitable. However with oil prices nearly double it is killing them. Basically the industry cannot support $50+ a barrell.


User currently offlineAAR90 From United States of America, joined Jan 2000, 3476 posts, RR: 46
Reply 4, posted (10 years 1 week 5 days 18 hours ago) and read 3279 times:

I was talking to a friend that is still at AA, he heard directly from a level 5 manager...

A level-5 manager knows nothing about what AA senior management is thinking unless senior management makes an announcement. AA senior management has made no such announcement.

...that unless oil prices drop to below $40 a barrell by February...

The price of oil is about the same for all USA domestic airlines as most did not have the cash to purchase in advance (hedging).

...AA will seek a 20% across the board paycut...

Rumor only. AA senior management is fairly well pleased with the competitive labor costs it is operating with at the moment. The only thing that would change how AA senior management views labor costs would be a change in competitors' labor costs. i.e. UA successfully defaulting on its retirement plans.

...along with more layoffs...

This is possible, but not due to fuel prices. The ongoing effort to reorganize operations to minimize costs is creating the opportunities to reduce manpower. i.e. moving 737 flying out of NorCal creates reduced maintenance manpower requirements (latest rumor is 40-50 maintenance folks to be furloughed in spring).

...or it may be forced into Chapter 11.

Not even close to a rumor.

I hope it is not really true.

Sounds like someone's pulling your chain.



*NO CARRIER* -- A Naval Aviator's worst nightmare!
User currently offlineRelayze From United States of America, joined Feb 2004, 115 posts, RR: 3
Reply 5, posted (10 years 1 week 5 days 15 hours ago) and read 3054 times:

AAR90 is right...A level 5 knows nothing until an announcement is made. I always like those "a really good friend of mine told me" or "I heard it from someone really involved on this" rumors...


User currently offlineKen777 From United States of America, joined Mar 2004, 8329 posts, RR: 9
Reply 6, posted (10 years 1 week 5 days 14 hours ago) and read 2928 times:

Oil prices have hit airlines hard and will continue to do so in the future.

The challenge for airlines will be to adjust their operations and pricing to make a profit in this new world of expensive oil. There is as much a need to look at routes flown (and frequency) and equipment used as there is to look at long term labor costs. Management structures, clerical functions and data processing costs are going to come under equally intensive reviews.

The one thing I know is that any airline looking for additional cuts from the unions had better make them at the management levels before going to the table.


User currently offlineAa717driver From United States of America, joined Feb 2002, 1566 posts, RR: 13
Reply 7, posted (10 years 1 week 5 days 7 hours ago) and read 2681 times:

I keep beating this drum but it's not been disproven. The legacies have a huge infrastructure disadvantage relative to the LCC's. The oil prices(absent hedging) are a level playing field--unless you have a "marginally" less fuel efficient fleet.

AA's -80's and 757's are less fuel efficient than the LCC's A320/319/717/73NG's. It may not be a lot, but on the scale we're talking, it will make a difference.

Ckfred--1.) USAir will leave a dip in the road, not a gaping hole.

2.) UAL won't go anywhere soon and they will keep cutting fares to generate cash(we've seen this before), thus hurting the legacies--not the LCC's.

3.) We are now seeing a increase in demand from the third world, not just the U.S. T. Boone has his opinion. I wouldn't bet your buddy's check airman career on it...

4.) As I said, the LCC's need less cash flow to feed their infrastructure. Wall St. is getting tired of extending credit to the legacies...

Again, as I've said before, TUL, MCI, AFW... Delta Jet Base. 777's, 744's, A300's, etc. Big cost items, big mx items...

We'll see.TC



FL450, M.85
User currently offlineAa777jr From , joined Dec 1969, posts, RR:
Reply 8, posted (10 years 1 week 5 days 7 hours ago) and read 2577 times:

I just got off the phone with my CFI who is a AA International Captain and Check Airman. His last flight was ORD-PHX-SFO-ORD and tomorrow is he taking a TW captain to check him out from DFW-STL-MIA-STL-DFW. I asked him why he was flying all these domestic routes lately. He just said it was "scheduling" because he had an obligation as a Check Airman. He did mention something about his the pay is less than his international routes, but it was "job security". I really hope AA isn't headed in a downward spiral as other carriers appear.

AA777jr


User currently offlineAAR90 From United States of America, joined Jan 2000, 3476 posts, RR: 46
Reply 9, posted (10 years 1 week 4 days 17 hours ago) and read 2368 times:

I asked him why he was flying all these domestic routes lately. He just said it was "scheduling" because he had an obligation as a Check Airman.

You need to understand that your "International Captain" is first and foremost a Check Airman (who has some or all of AA's International Divisions qualifications). His "schedule" is not set by the usual monthly bid process, but rather by AA's training needs. If AA needs flight checks done on domestic pilots, he'll be assigned to whatever that domestic pilot is scheduled to fly (the domestic pilot is not assigned to what the check airman wants to fly unless the domestic pilot has no schedule).

He did mention something about his the pay is less than his international routes,

Called International Override Pay... and it isn't very much IMHO (which is why I don't bid/fly international divisions).

...but it was "job security".

Job security for his Check Airman status... which has its own "bonus" system (he makes more than a comparable line pilot can make, but has a bit less control of his monthly schedule).

I really hope AA isn't headed in a downward spiral as other carriers appear.

Holding their own...at the moment. Finding the bottom line (in general) is relatively easy. Just look at how the airline's management is behaving. If it is saving pennies (not paying bills until the last possible moment & not reinvesting in the airline) the airline management is not looking very far ahead and the airline is in that "downward spiral." If management is paying the bills (on time or early) and reinvesting in the airline (looking farther ahead) then the airline is at least financially stable with prospects looking up. AA management has been reinvesting in AA for a bit more than a year now and has started the process of reducing AA's debt load. Not out of the woods, but definitely not in a downward spiral.



*NO CARRIER* -- A Naval Aviator's worst nightmare!
User currently offlineJonesy869 From United States of America, joined Sep 2004, 16 posts, RR: 0
Reply 10, posted (10 years 1 week 4 days 15 hours ago) and read 2197 times:

The legacy carriers are in for a rough ride.....expect management to attack everything they can get..including pensions...US lost their A funded retirement..mine was rooughly 900,000 after 15 years which I have been furloughed now for almost 2 years plus the option to fly at the regional carrier is gone because rj's have stopped coming....US will probably go away but won't make a difference....UA AA DL NW and CO will see massive paycuts layoffs and loss of pension to some extent...US ride is well down the road and is just happening sooner because we had no capital to start with....Sorry to say it boys...but get what u can now and hope for the best....this career has and will be devasted...in 3 years expect to be making half of what u are now.....UA will probably end up half of what it is today....and I think every legacy airline will be bankrupt..unless somebody controls fares........there is no chance for rebound..probably in 7 years there will be 4 sw,s running around

User currently offlineRogerthat From United States of America, joined Dec 2003, 566 posts, RR: 0
Reply 11, posted (10 years 1 week 4 days 13 hours ago) and read 2081 times:

If this speculation by a low level manager is true, I say kudos to AA for thinking ahead.

It will be good for the industry as a whole when US Air shuts down. But lets not kid ourselves into thinking the old Big 5 will be able to set whatever price they need to cover their bloated costs. US' capacity will soon find its way to the most efficent operators, the LCCs, who will use it to beat down the legacys even more.

The good old days aren't coming back.


User currently offlineJonesy869 From United States of America, joined Sep 2004, 16 posts, RR: 0
Reply 12, posted (10 years 1 week 4 days 12 hours ago) and read 2003 times:

hey rogerthat...how bout when UA goes out of business...that would be great for US!....and others...analysts says it needs a UA or AA to leave the market to take care of overcapacity......

User currently offlineKim777fan From United States of America, joined Aug 2004, 510 posts, RR: 1
Reply 13, posted (10 years 1 week 4 days 12 hours ago) and read 1966 times:

Hey... What would happen if UA, US, DL, *AND* AA went belly up??

Maybe HP could get ALL of their 757's!!  Big thumbs up  Acting devilish


User currently offlineRogerthat From United States of America, joined Dec 2003, 566 posts, RR: 0
Reply 14, posted (10 years 1 week 4 days 11 hours ago) and read 1902 times:

Jonesy,

What I was trying to say is that the capacity reduction from a shutdown is temporary. US Air's fleet won't rot in the desert for long. The airplanes will find their way to a new operator and, as you said in your post, so will the employees.

What we are seeing are the perils of deregulation brought to you by Senator Ted Kennedy.


User currently offlineTPAC From United States of America, joined Aug 2004, 40 posts, RR: 0
Reply 15, posted (10 years 1 week 4 days 11 hours ago) and read 1815 times:

It is extemely probable that we will see a notable pulldown in aircraft capacity in the domestic arena. Many flights will not be able to cover variable expense going into the winter period given the high price of jet fuel. The trick will be getting the costs out in line with any capacity adjustments.

It just doesn't make any sense to operate high cost, high frequency flying with fuel this high. The cost savings need to be focused on effeciency and producing as many seats per departure for each gallon burned. Higher density seating should help matters in this regard. I don't get why some carriers continue to schedule "wing tips" is this environment.


User currently offlineThrust From United States of America, joined Sep 2003, 2690 posts, RR: 10
Reply 16, posted (10 years 1 week 4 days 10 hours ago) and read 1787 times:

This story is getting too old. How many more times will we go into economic recession before the bottom drops out? First there is the oil crisis of 1974, then deregulation, then 9/11, and now another oil crisis. It is clear that over half of our airline industry is in danger of being destroyed because of this...the Big Five (UA, NW, CO, AA, DL) are getting more and more likely to go under...US Airways is just about there, and certainly in my opinion will not be the last U.S. carrier to go down in the next 6 years if they do indeed go down.


Fly one thing; Fly it well
User currently offlineLmp737 From , joined Dec 1969, posts, RR:
Reply 17, posted (10 years 1 week 4 days 10 hours ago) and read 1740 times:

"Again, as I've said before, TUL, MCI, AFW... Delta Jet Base. 777's, 744's, A300's, etc. Big cost items, big mx items..."

AA717driver:

If I did'nt know any better I would almost say you're a tad bitter. For some reason I get the impression that you feel you would still be employed at AA if only TUL, AFW and MCI had been shut down.

I do agree that MCI shouyld have been shutdown right after the "merger". Actually AA should never have bought TWA in the first place. They would have gone away on their own without our help.


User currently offlineCkfred From United States of America, joined Apr 2001, 5273 posts, RR: 1
Reply 18, posted (10 years 1 week 4 days 4 hours ago) and read 1577 times:

First of all, a company cannot terminate its pension plan at will. Usually, a company terminates its plan when it liquidates through Chapter 7. It can also terminate a pension plan during a Chapter 11 proceeding, with permission of the court.

In the case of UA, the Pension Guaranty Board has been fighting UA's possible termination, because it's short of funds.

So, AA, DL, NW, and CO can't simply terminate their plans to save money. And from what I understand, AA's unions made sure that the plans would stay 100% funded as part of the wage cuts.

As for the legacies all going out of business, it won't happen for two reasons. First, most LCCs aren't interested in flying internationally. My friend at AA is a F/O, and he often has WN pilots in the jump seat. WN has no interest in flying to Canada and Mexico because: a) getting involved in currency fluctuations, b) red tape involved on both sides of the borders, c) the cost of starting trans-border flying, and d) plenty of new cities available in the U.S.

The LCCs aren't about to rush out and start buying used 767s or new 7E7s to start service to Europe or Asia. And a lot of people wouldn't fly them. My wife can only fly coach for domestic travel, but she gets to fly business for travel overseas.

Second, the LCCs want routes that are profitable. Flying to places like TVC, PWM, or RST only makes sense when flights connect at a hub with a multitude of destinations. WN's last expansion was PHL.


User currently offlineCarpethead From Japan, joined Aug 2004, 2971 posts, RR: 3
Reply 19, posted (10 years 1 week 3 days 23 hours ago) and read 1446 times:

When revenue doesn't equal costs, then its losses. Economics 101.
Oil prices are not going to go down anytime soon, if not will go even higher.

Attacking labor costs can only go so far and sooner or later the labor force will become demoralized. Plus fuel efficiency will go to only certain lengths at current technologies.

Somebody just needs to take the first step on a large price hike in ticket prices across the board. Call it anti-trust but that's what needs to be done. So if you lose some low end business, so be it. If this means loss in capacity then start parking RJs or ineffcient mainline aircraft.

I for one will not put off personal or business travel just because even a large price hike as $50.


User currently offlineKen777 From United States of America, joined Mar 2004, 8329 posts, RR: 9
Reply 20, posted (10 years 1 week 3 days 13 hours ago) and read 1280 times:

I wish it would only be a $50 price hike. AA is now going to charge $250 each way to upgrade flights over the Atlantic using miles. $500 round trip upgrade PLUS miles. Lots of happy elite flyers at AA these days.

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