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AA Expects Higher Revenues  
User currently offlineZCHANNEL From United States of America, joined Jan 2006, 187 posts, RR: 0
Posted (8 years 6 months 20 hours ago) and read 1567 times:

Check this out:

http://news.moneycentral.msn.com/pro...p?feed=AP&Date=20060125&ID=5446933

Sounds optimistic, but it seems fuels costs may rain on that parade. It's kind of like me going to Vegas and winning $500 while losing $600. Thoughts?

[Edited 2006-01-25 18:58:02]


ZChannel: Member FDIC
7 replies: All unread, jump to last
 
User currently offlineReins485 From United States of America, joined Jul 2005, 136 posts, RR: 0
Reply 1, posted (8 years 6 months 19 hours ago) and read 1524 times:

In a related article James Beer talks about paying down AA 1.2 billion of their 20 billion dollar debt.
"We need to pull that debt balance down as quickly as we can ... so we can start to use that cash on things like capital spending," Beer said.

http://yahoo.reuters.com/financeQuot...06-01-25_16-48-18_n25364310_newsml

He also said that AA wont be buying new airplanes but focusing instead on technology and upgrading interiors on the plane.

I think this is a better idea than buying new plans. Because as long as the airplane looks clean and modern on the inside, 99 percent of the flying public wouldn't be able to tell a plane that is one year old or 20.

Reins485


User currently offlineCkfred From United States of America, joined Apr 2001, 5167 posts, RR: 1
Reply 2, posted (8 years 6 months 18 hours ago) and read 1460 times:

It all depends on jet fuel. Although oil reserves were down today, gasoline and distillates reserves, which I believe includes jet fuel, were up. That sent prices of crude oil and other petroleum products down.

If the situations in Iran and Nigeria improve, that should cause prices to start treding downward again for the long-term.

Obviously, it's cheaper to spend money to keep planes in good flying condition than to buy new planes, but AA should seriously consider several options.

First, it needs to lock in orders for the 787, even if for delivery in 2011 or later. The longer AA waits to place an order, the longer it will wait to take delivery. The fact that Boeing believes that the 787 will save 20% on operating costs should nudge AA to make a commitment.

Second, AA should inquire of Boeing whether the replacement for the 737NG line will include a 100-seat model than can fly routes ranging from DFW-AUS to LGA-DFW. AA isn't desparate for a 100-seat airplane, but the retirement of the F100s has caused problems for scheduling, as well as complaints from elite AAdvantage members who are now flying Eagle.

If Boeing isn't willing to commit to a plane that can fly routes that the 737-500 flies for UA, then AA should start working on a plan to buy Embrear 190s and figuring whether Eagle or mainline crews should fly them.

Third, of the MD-80 fleet that AA bought, as opposed to the fleet that it inherited from TWA, the first 40 to 60 aircraft are pretty much over 20 years old. At some point, maintenance is going to become very expensive. AA may want to consider replacing them with 737-800s, while looking at other options to keep the rest of the fleet flying until the replacement for the 737NG line is ready.


User currently offlineAAden From United States of America, joined Jan 2006, 835 posts, RR: 0
Reply 3, posted (8 years 6 months 10 hours ago) and read 1316 times:

It's definitely a good idea to upgrade the interior of there planes like the super 80 and 757 maybe they could put some in flight entertainment in the super80s

User currently offlineCommavia From United States of America, joined Apr 2005, 11411 posts, RR: 62
Reply 4, posted (8 years 6 months 9 hours ago) and read 1303 times:

Quoting Ckfred (Reply 2):
First, it needs to lock in orders for the 787, even if for delivery in 2011 or later. The longer AA waits to place an order, the longer it will wait to take delivery

No they don't. AA is more than happy to wait to take delivery because they don't have the cash right now to commit to such a huge outlay for capex. They are trying to preserve cash right now and pay down debt as their first cash-intensive priority. In addition, taking on even more debt in order to finance these aircraft is also not an option for obvious reasons.

Quoting Ckfred (Reply 2):
The fact that Boeing believes that the 787 will save 20% on operating costs should nudge AA to make a commitment.

The problem is that with money so extraordinarily tight right now at AA (and virtually every other airline in America), the company will not commit to an outlay of just about any cash unless they deem the financial return on investment as being swift and fast. Recently, it was reported here on A.net and elsewhere that AA's "magic number" is a return on investment in 24 months or less. AA wants the savings from the investment to pay for itself in under two years, like the case with the 20 sets of 757 winglets, and the new 737 winglet set that is in testing. AA deemed this to have a fairly fast return on investment, which is why I fully expect capex on more winglets, perhaps for the entire 737 and 757 fleets, in the next 12-18 months.

Quoting Ckfred (Reply 2):
Second, AA should inquire of Boeing whether the replacement for the 737NG line will include a 100-seat model than can fly routes ranging from DFW-AUS to LGA-DFW.

Since the 737 replacement is probably not going to even be offered to customers for at least another 5-6 years, and probably won't be in service for another 10 years.

Quoting Ckfred (Reply 2):
Third, of the MD-80 fleet that AA bought, as opposed to the fleet that it inherited from TWA, the first 40 to 60 aircraft are pretty much over 20 years old.

Again, though, the economies of scale generated by operating over 350 MD80s makes up for some of the excess costs of operating older planes. In addition, while the MD80s are getting older, and are not as fuel efficient as the newer 737s and A320s, they are actually aging fairly well (like much of the MD line). As many people might tell you, the MD80s are still, generally speaking, great planes -- economically and operationally, given their age and the size of the fleet.


User currently offlineMirrodie From United States of America, joined Apr 2000, 7443 posts, RR: 62
Reply 5, posted (8 years 5 months 4 weeks 1 day 17 hours ago) and read 1201 times:
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I for one would love to see AA acquire some of these new aircraft but is it likely?


I think the thought of upgrading interiors is a good one though, judging from the complaints I've read on flyertalk.com



Forum moderator 2001-2010; He's a pedantic, pontificating, pretentious bastard, a belligerent old fart, a worthless st
User currently offlineCkfred From United States of America, joined Apr 2001, 5167 posts, RR: 1
Reply 6, posted (8 years 5 months 4 weeks 1 day 13 hours ago) and read 1144 times:

Commavia:

Generally, when an airline orders an airplane, it pays a deposit when the order is made. Then, it has to pay additional money, when the manufacturer starts to assemble the airplane on the production line. The balance is due upon delivery.

I don't know the exact percentage of a purchase price that is due at each payment, but I'm sure AA could get Boeing to agree to the smallest deposit possible.

As an AMR shareholder, I don't want AA to make the opposite mistake that it made, when it ordered the MD-11. AA was so anxious to get long-range aircraft that it went with the MD-11, because it would be available before the 777. If AA had been patient, it could have had 777s in 1995 or 1996.

Remember, too, that AA has a much larger cash position than CO or NW, both of who have ordered the 787.

As for the MD-80s, according to a friend of mine, who is a pilot with AA, the MD-80s still have a lot of time on their airframes. The problem is that the MD-80s require C-checks more frequently than the 727. One reason that AA held on to the 727s for so long is that, despite the cost of flying a 3-engine plane with an F/E, they were very easy and inexpensive to maintain.

The MD-80s are much cheaper to fly, but the cost of keeping them maintained is starting to get a bit pricey.


User currently offlineCommavia From United States of America, joined Apr 2005, 11411 posts, RR: 62
Reply 7, posted (8 years 5 months 4 weeks 1 day 13 hours ago) and read 1129 times:

Quoting Ckfred (Reply 6):
Generally, when an airline orders an airplane, it pays a deposit when the order is made. Then, it has to pay additional money, when the manufacturer starts to assemble the airplane on the production line. The balance is due upon delivery.

I know how the system works, but AA doesn't want to pay additional money -- at any stage of production. AA doesn't want to outlay cash now, when the plane goes into production, upon delivery, or at any other time. AA right now is heavily focused on getting the planes they already have to be profitable. Buying new planes is not their priority right now.

Quoting Ckfred (Reply 6):
As an AMR shareholder, I don't want AA to make the opposite mistake that it made, when it ordered the MD-11.

I, too, am an AMR shareholder, and I, too, want AA to buy the best plan for their operation, and not the first one available, which is why I think AA's position on the 787s is prudent. Not only do they not want to invest in the planes now, but they want to see how they perform in regular service in a few years. Then they'll make a final decisino (which I expect will be to buy 787s, anyway, but perhaps a later, more advanced, version).

Quoting Ckfred (Reply 6):
Remember, too, that AA has a much larger cash position than CO or NW, both of who have ordered the 787.

Then I suppose AA is just being more fiscally conservative with their money, and I doubt anyone -- given the circumstances -- could really fault them for that.

Quoting Ckfred (Reply 6):
The MD-80s are much cheaper to fly, but the cost of keeping them maintained is starting to get a bit pricey.

Exactly.


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