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AMR Expected To Lose Over $1bil In 2011 Part 2  
User currently offlineLipeGIG From Brazil, joined May 2005, 11438 posts, RR: 58
Posted (3 years 5 months 2 days 22 hours ago) and read 5761 times:
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As the first thread reached more than 250 posts, and the subject continue to attract our members, we kindly ask you to continue the discussion here on Part II

Link to the first thread:

AMR Expected To Lose Over $1bil In 2011 (by LAXintl Mar 23 2011 in Civil Aviation)


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32 replies: All unread, showing first 25:
 
User currently offlineNYCAdvantage From United States of America, joined Sep 2009, 355 posts, RR: 0
Reply 1, posted (3 years 5 months 2 days 1 hour ago) and read 5422 times:

The way AMR is going I would not be surprised to see AA selling more of their assets,
when American Airlines convinced Japan Airlines to stay with American and Oneworld in early 2010, American guaranteed that JAL's revenues would go up at least $100 million a year by sticking with its old partners. well guess what after the earth quake, Tsunami and of course the nuclear plant meltdown AMR may have to pay.

http://aviationblog.dallasnews.com/a...emember-american-airlines-100.html

and then you have AMR executives performance share plan, it should have been called "AMR executives performance funniest" how in the world by loosing money time after time this executives still manage to get more money, the way this is going my friends I am sorry to say AMR is going to have a dry well soon.

http://aviationblog.dallasnews.com/a...wu-amr-executive-pay-is-red-h.html


User currently offlineIADLHR From Italy, joined Apr 2005, 735 posts, RR: 0
Reply 2, posted (3 years 5 months 2 days 1 hour ago) and read 5401 times:

Now, faced with with all the issues that AA is facing, as people have pointed out, now comes the storm damage at STL and its temporary closing. It remains to be seen when STL will reopen.

I wonder how much thios will affect the bottom line and the bleeding, at AA, will, possibly acelerate.

In view of the onditions, at AA, I, have started to use my stockpiled AA miles. It was the first time I have flown AA in a very, very long time. I did DCA-DFW-DCA.

I was very surprised as the service was excellent, flights were early, food in first class was very good. I have been flying UA for quite awhile now and am at the point where I can barely stand UA anymore. Thus my willingness to try AA. It was a very nice trip. So much so I am making plans to go IAD-LAX-IAD on AA instead of UA.

I hope AA an hang in there with all the economic headwinds, some of them, well beyond their control and seemingly against them.


User currently offlinePRAirbus From Puerto Rico, joined Apr 2005, 1139 posts, RR: 1
Reply 3, posted (3 years 5 months 1 day 23 hours ago) and read 5329 times:

AA needs new top management, staying out of bankruptcy is NOT enough. AA should have gone bankrupt when the others did...AA still has tons of cash $$$$$ (over $6billion) that do not justify a Chapter 11 filing. They are at a competitive disadvantage because all the other majors dumped debt and screwed their employees; AA had too much $$$ to file for bankruptcy when the others did...now it is hurting them. AA blames labor costs for its losses however its top managers keep lining their pockets with millions $$$$$. How can they get compensated for running an airline that is bleeding???? No wonder AA employees are so upset!!! Management has pocketed over $100,000,000 in bonuses since 2005, employees gave millions in concessions in 2003 and AA won't sign contracts with any union. Awful!!!! A typical example of Corporate America's GREED a-la Bernie Madoff.  

User currently offlinecrAAzy From United States of America, joined Jan 2008, 787 posts, RR: 0
Reply 4, posted (3 years 5 months 1 day 13 hours ago) and read 5124 times:
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STL has alreay re-opened and AA (as well as other airlines) have already resumed partial operations. In fact, the airport plans to be back up to 70% capacity on Sunday. http://www.stltoday.com/news/local/m...9bb30f31a.html?mode=image&photo=10

The loss to AA and STL will be minimal, if any, due to the abundance of available gates at STL, intactness of the remainder of the airfield, and insurance payments for diasters such as this.


User currently offlinetexan From New Zealand, joined Dec 2003, 4278 posts, RR: 52
Reply 5, posted (3 years 5 months 1 day 11 hours ago) and read 5003 times:

From Part 1:

Quote:
Reply 159
Quoting NYCAdvantage (Reply 158):
Lets say that AA goes under Chapter 11, what would happen to the routes and slots, would they lose them or they would still be under protection?


As soon as an person or business files for bankruptcy protection, no creditors are allowed to legally seize assets even if they were used as collateral. So for the immediate future AA would retain all assets. Nobody could honestly tell you what specific assets AA would be allowed to keep during the restructuring. That is a fluid process as the creditors, company, and other stakeholders devise a plan that all can agree on moving forward. Some assets would definitely be relinquished, but no one could tell you now which assets would stay and which ones would go. I can tell you that secured creditors, those that have assets backing their loans have priority over unsecured creditors, but in bankruptcy even secured creditors often end up with less than what they were originally owed. But sometimes unsecured creditors might get preferential treatment, for an airline fuel companies would be unsecured creditors, but one of the first orders of business would be to get the judge to allow them pay the fuel companies so that their fuel supply doesn't get cut off because they can't operate without fuel and the judge would likely approve that request.

I love the automatic stay provision.

The slot question is interesting. While airlines use slots as collateral, the majority of courts do not define slots as property of the company. While most courts from the mid-1980s on have held that an airline holds some proprietary interest in a slot and that a slot has some characteristics of property, the guiding law holds that slots are not property of the estate.

Then there is the government interest in slot allocation. The government "creates" the slots, so to the government they shall be returned. Or so says the government. At the very least, the government controls who receives slots and must approve all transactions . . . even if one were to happen in bankruptcy (they've intervened before).

So one question that arises is what is the value of taking a security interest in a domestic airport slot at all? And, while I'm not positive about the laws of Japan and the U.K. concerning slots in bankruptcy proceedings, what is the value of an international slot since during Chapter 11 the creditor cannot collect the asset and the decision over whether or not it is estate property is left in the hands of the U.S. federal courts?

As a creditor, you look at what AMR is putting up as collateral and have to question if any of the assets have any true value unless they are sold off. And, to put a hypothetical and unrealistic situation out there, if AMR enters Chapter 7 or ceases to use the slots for a period of time -- usually 3 to 6 consecutive months -- the slots revert back to the government issuer, not to the airline's estate. That is true in the U.S. and I am 90% sure that is true in the U.K. I still have no idea about Japanese law, but for this hypothetical we will assume it operates in the same way.

If this happens and you are a creditor, you get absolutely nothing for the investment you made. While creditors who took security interests in tangible property receive some sort of return on investment, albeit less than their initial investment -- especially for those who are not the initial secured party on any asset -- creditors who took out a security interest in the slot would receive nothing, no matter their priority in payment.

Therefore, it is completely understandable why the creditors wanted AMR to put up more collateral -- they want some sort of assured income. I would advise my clients against exposing themselves to that kind of risk. That is if they were thinking this far ahead. The other option is that they just don't trust AMR's long term viability and were going to issue the money at a higher interest rate regardless. That is the more realistic option.


As far as AMR as a whole goes, changes will occur, whether voluntarily or not. If AMR doesn't step up and make the changes necessary, investors will abandon the company and force change. Other than selling Eagle, who knows what those changes will be. The afterglow effect of not entering Chapter 11 wore off years ago. While I think it is criminal to run away from the pension plan you guaranteed to your employees and tell the government to pick up the slack, that would save AMR over $500 million annually. Good luck doing it through anything but Chapter 11.

I hate the idea of using Chapter 11 to reform a company. It basically rewards management for running the thing into the ground while labour gets screwed again. But that is what happens in any incestuous industry -- and nearly all industries are incestuous. The same people are given the same positions time and time again. Or the people who are trained by those currently in charge end up running things -- and running things the same way. Idiocy is doing the same thing over and over but expecting a different result.

From my armchair position, AMR should do a couple things: plan a prepackaged Chapter 11 deal with its creditors and stakeholders; replace the management regime with an outside regime more open to change, someone in the vein of Alana Mullaly or a Steve Jobs type; and learn to borrow money when the company can, not when it has to -- had AMR thought ahead a couple of years ago and issued more and longer term debt, they could have received more money at a lower interest rate than today. AMR should also invest in new technologies, especially regarding fuel consumption, and lobby both the FAA and Congress hard to use RNP navigation into the airports it serves. From what I understand, the 757 and 767 fleets may have RNP, but not sure about the rest of the fleet. But at a savings approximately 400 pounds of fuel per approach (per AS press release information), and calculations including Eagle because I don't know how many daily flights AA mainline has, AMR would save just over $200 million per year in fuel costs if their fuel costs were equaled last quarter's $2.75/gallon.

On the other hand, if you look at other financial figures, AA isn't doing horrible. Still not doing well, just not doing horrible.
Current ratio:
UAL 0.95
AMR 0.78
DAL 0.64
LCC (USAirways) 1.02
JBLU 1.25
LUV 1.30
RJET 0.92

Or if you look at debt/equity, AMR is not as bad off as UAL, DAL, or LCC. So it does depend on the figures you concentrate on. Not saying AMR doesn't need to change, but perhaps the entire industry needs to continually change to survive long term.

Texan



"I have always imagined that Paradise will be a kind of library."
User currently offlineAirNZ From , joined Dec 1969, posts, RR:
Reply 6, posted (3 years 5 months 1 day 6 hours ago) and read 4850 times:

Quoting texan (Reply 5):
And, while I'm not positive about the laws of Japan and the U.K. concerning slots in bankruptcy proceedings, what is the value of an international slot since during Chapter 11 the creditor cannot collect the asset and the decision over whether or not it is estate property is left in the hands of the U.S. federal courts?

Not quite sure what you're actually meaning here (and I assume you are referring to within US) but in the United Kingdom the slots at any airport are not owned by an airline and certainly are well outside the jurisdiction of US courts, whether federal or otherwise.


User currently offlineSTT757 From United States of America, joined Mar 2000, 16872 posts, RR: 51
Reply 7, posted (3 years 5 months 1 day 1 hour ago) and read 4752 times:

FA's not happy;

http://www.nydailynews.com/ny_local/...executive_bonuses_at_jfk_airp.html



Eastern Air lines flt # 701, EWR-MCO Boeing 757
User currently offlineLAXdude1023 From India, joined Sep 2006, 7616 posts, RR: 24
Reply 8, posted (3 years 5 months 1 day 1 hour ago) and read 4736 times:

Quoting STT757 (Reply 7):
FA's not happy;

What a surprise.

I personally believe AA needs different leadership. Morale is at an all time low and if they are still getting bonuses, that needs to be stopped. They are doing a piss poor job of running the airline. They certainly dont deserve them.



Stewed...Lewd...Crude...Irreverent...Belligerent
User currently offlineSTT757 From United States of America, joined Mar 2000, 16872 posts, RR: 51
Reply 9, posted (3 years 5 months 1 day 1 hour ago) and read 4707 times:

Quoting LAXdude1023 (Reply 8):
I personally believe AA needs different leadership. Morale is at an all time low and if they are still getting bonuses, that needs to be stopped. They are doing a piss poor job of running the airline. They certainly dont deserve them.

Anyone got Gordon Bethune's phone number?..



Eastern Air lines flt # 701, EWR-MCO Boeing 757
User currently offlinetexan From New Zealand, joined Dec 2003, 4278 posts, RR: 52
Reply 10, posted (3 years 5 months 19 hours ago) and read 4485 times:

Quoting AirNZ (Reply 6):
Not quite sure what you're actually meaning here (and I assume you are referring to within US) but in the United Kingdom the slots at any airport are not owned by an airline and certainly are well outside the jurisdiction of US courts, whether federal or otherwise.

Right. I was trying to say that, I just did it poorly! The slots at UK airports would not be part of the bankruptcy estate and would revert to the issuing authority. Since AMR put up slots at LHR and other airports as collateral, these assets would be useless if AMR entered Chapter 11 bankruptcy protection.

Texan



"I have always imagined that Paradise will be a kind of library."
User currently offlineLAXintl From United States of America, joined May 2000, 25406 posts, RR: 49
Reply 11, posted (3 years 5 months 18 hours ago) and read 4400 times:

Quoting texan (Reply 10):
these assets would be useless if AMR entered Chapter 11 bankruptcy protection.

What are you talking about?

Did UA/NW/DL loose any slots in BK? Matter of fact they were able to collateralize them further in BK.

Putting up things like slots has long been held practice going back to the 1980s with PA and TW having done it.

There is a well established second hand market for slot trading which helps determine their value and marketability.



From the desert to the sea, to all of Southern California
User currently offlinetexan From New Zealand, joined Dec 2003, 4278 posts, RR: 52
Reply 12, posted (3 years 5 months 15 hours ago) and read 4269 times:

I understand the second-hand market. But in theory, such an "asset" holds less value because it is not property. If the airline elects to hold onto the slot throughout the Chapter 11 process and is then forced into liquidation, or if the airline does not use the slot over the specified time period, the slot reverts to the FAA or other issuing agency with no money being paid to the creditors. Not that it happens often, but it does happen -- at least 6 times since deregulation. There is a larger risk in bankruptcy of not collecting on security interests in slots than in physical assets of the debtor.

Texan

edited to add: Since slots are not part of the estate, they do not fall under the automatic stay provision of the bankruptcy code. Again, yes, there is a second-hand market and a large one at that. But an airline cannot be forced to sell the slots it controls while in bankruptcy. If you are talking about an airline that may face some of these problems, it is a riskier proposition than having a security interest in property of the estate.

[Edited 2011-04-24 16:40:13]


"I have always imagined that Paradise will be a kind of library."
User currently offlinecommavia From United States of America, joined Apr 2005, 11640 posts, RR: 61
Reply 13, posted (3 years 5 months 15 hours ago) and read 4221 times:

Quoting texan (Reply 5):
I hate the idea of using Chapter 11 to reform a company. It basically rewards management for running the thing into the ground while labour gets screwed again.

While some (like myself) see it as unfortunate, bankruptcy has become a business strategy used to abrogate liabilities and obligations, to say nothing of labor contracts. In my view, the vast majority of AA's problems today can be directly traced to the fact that the company - both its management and its labor unions - decided (I believe admirably) not to file for bankruptcy when every single one of its legacy competitors has, at least once.

AMR has in the last few years suffered from ultra-conservative, unimaginative management, horrible labor relations and unrealistic union expectations, and a myriad of macroeconomic and fuel cost pressures. But, I believe that all of those would have been less severe issues if AMR had not faced for the last near-decade the competitive environment of post-bankruptcy competitors that it has.

Quoting texan (Reply 5):
From my armchair position, AMR should do a couple things: plan a prepackaged Chapter 11 deal with its creditors and stakeholders; replace the management regime with an outside regime more open to change, someone in the vein of Alana Mullaly or a Steve Jobs type; and learn to borrow money when the company can, not when it has to -- had AMR thought ahead a couple of years ago and issued more and longer term debt, they could have received more money at a lower interest rate than today. AMR should also invest in new technologies, especially regarding fuel consumption, and lobby both the FAA and Congress hard to use RNP navigation into the airports it serves. From what I understand, the 757 and 767 fleets may have RNP, but not sure about the rest of the fleet. But at a savings approximately 400 pounds of fuel per approach (per AS press release information), and calculations including Eagle because I don't know how many daily flights AA mainline has, AMR would save just over $200 million per year in fuel costs if their fuel costs were equaled last quarter's $2.75/gallon.

AA needs to get contracts in place with the unions, and remove that enormous cloud of uncertainty and labor animus that has been holding AMR back for years. Both management and labor need to recognize that nobody benefits - workers most of all - from refusing to compromise. Management has to agree to at least modest increases in compensation for employees, and unions have to accept at least modest improvements in productivity and work rules to make AA more competitive with post-bankruptcy airlines that either have more flexible union rules, or no unions at all.

Specifically, the company needs to get a deal done with the pilots that gives AMR management flexibility to do two things: 1) fly longer-haul flights, and 2) get more 70- and 90-seaters on the property. With the 777-300ERs soon to arrive, AA has a huge opportunity to not only grow its network, but bolster its hubs and simultaneously reduce its unit (per-ASM) costs by generating more ASMs with its fleet through longer flights. Operating small jets (70-90 seats) is a competitive imperative, and the pilots union's unwillingness to allow this to be economically viable at AMR has made the entire company less competitive and unable to access growing revenue flows.

This alone would have an enormous, transformational effect in my view by allowing AA to deploy a new, more modern, and more flexible fleet in a far more effective and economical way than it currently can.

As for Arpey - I think it is unfortunate that he will probably never get credit for what he has been able to accomplish. By effectively leveraging the billions in concessions that the company secured in 2003 from lenders, creditors, vendors, and yes, the unions, he has managed to keep AMR out of bankruptcy while virtually all of its legacy peers have become insolvent. He has funded the employees' defined benefit pensions, continued to pay labor to union contracts even when bankrupt carriers undercut those contracts, reduced AMR's net debt substantially from its 2003 peak, ordered hundreds of new airplanes, all while keeping AMR generally operating-cash flow-positive. This is an accomplishment, but it has been overshadowed by a total lack of aggressiveness, innovation, or creativity, and a torrent of stock options.

It is becoming apparent that his presence is now becoming counter-productive. He has created so much personal animosity towards himself - some of it deserved, some of it not, in my view - that the debate is no longer about how to make AMR competitive - it's about him personally. That cannot continue.

Management should not be taking stock options at a time like this, when AMR is financially under-performing every other major U.S. carrier. I have been an ardent defender of those stock options - which I believed and still believe were well deserved several years ago when AMR was, by contrast, outperforming just about all of its legacy peers (then in bankruptcy). Today, however, they are inappropriate. The stock options are not AA's problem, but they are creating a massive problem for AA - they are antagonizing already-radicalized union labor and depressing morale.

AMR need not file for bankruptcy, but it does need to make some substantive changes in the way it does business.


User currently offlineLAXdude1023 From India, joined Sep 2006, 7616 posts, RR: 24
Reply 14, posted (3 years 5 months 13 hours ago) and read 4082 times:

Quoting commavia (Reply 13):
AMR has in the last few years suffered from ultra-conservative, unimaginative management, horrible labor relations and unrealistic union expectations, and a myriad of macroeconomic and fuel cost pressures. But, I believe that all of those would have been less severe issues if AMR had not faced for the last near-decade the competitive environment of post-bankruptcy competitors that it has.
Quoting commavia (Reply 13):
AMR need not file for bankruptcy, but it does need to make some substantive changes in the way it does business.

This hits the nail on the head. Drastic changes need to come or AA will be a memory.



Stewed...Lewd...Crude...Irreverent...Belligerent
User currently offlinesteeler83 From United States of America, joined Feb 2006, 9210 posts, RR: 20
Reply 15, posted (3 years 5 months 13 hours ago) and read 4054 times:

Well, my wife and I flew on AA for the first time for our Honeymoon, and we both agree that in all of our flying experiences combined, that trip was by far our best experience, period. We upgraded to first class on the PHL-MIA leg of our trip to AUA, and the product was very good. We had a nice seat, and the breakfast, a fratatta, was what we considered to be gourmet.

I really do not want to see anything happen to AA; I hope for the best!   



Do not bring stranger girt into your room. The stranger girt is dangerous, it will hurt your life.
User currently offlineLAXintl From United States of America, joined May 2000, 25406 posts, RR: 49
Reply 16, posted (3 years 5 months 12 hours ago) and read 3953 times:

Quoting steeler83 (Reply 15):
both agree that in all of our flying experiences combined, that trip was by far our best experience, period.

No offense, however you both should really get out some more. Even as a multi-year AA EXP, I would hardly rate AA's service and product more than 50% up the scale of airlines out there. Overall I'd term AA (along with most US majors) as simply mediocre.

Btw - congrats on the marriage!



From the desert to the sea, to all of Southern California
User currently offlineF9Animal From United States of America, joined Dec 2004, 5055 posts, RR: 28
Reply 17, posted (3 years 5 months 11 hours ago) and read 3918 times:

Quoting PRAirbus (Reply 3):
AA blames labor costs for its losses however its top managers keep lining their pockets with millions $$$$$. How can they get compensated for running an airline that is bleeding???? No wonder AA employees are so upset!!! Management has pocketed over $100,000,000 in bonuses since 2005, employees gave millions in concessions in 2003 and AA won't sign contracts with any union. Awful!!!! A typical example of Corporate America's GREED a-la Bernie Madoff.

There is only one group to blame for the losses. Corporate/Management.

Quoting LAXdude1023 (Reply 8):
I personally believe AA needs different leadership. Morale is at an all time low and if they are still getting bonuses, that needs to be stopped. They are doing a piss poor job of running the airline. They certainly dont deserve them.

This is very true. It is time for a complete makeover of the executive team. Trim the fat, and start from the top. The executives are so quick to reach for the lower paid employees wallets, and so quick to blame labor for the reason they are losing money. However, they fail to do a damned thing to fix routes, fix equipment, and fix bleeding routes.

Quoting commavia (Reply 13):
As for Arpey - I think it is unfortunate that he will probably never get credit for what he has been able to accomplish. By effectively leveraging the billions in concessions that the company secured in 2003 from lenders, creditors, vendors, and yes, the unions, he has managed to keep AMR out of bankruptcy while virtually all of its legacy peers have become insolvent. He has funded the employees' defined benefit pensions, continued to pay labor to union contracts even when bankrupt carriers undercut those contracts, reduced AMR's net debt substantially from its 2003 peak, ordered hundreds of new airplanes, all while keeping AMR generally operating-cash flow-positive. This is an accomplishment, but it has been overshadowed by a total lack of aggressiveness, innovation, or creativity, and a torrent of stock options.

It is becoming apparent that his presence is now becoming counter-productive. He has created so much personal animosity towards himself - some of it deserved, some of it not, in my view - that the debate is no longer about how to make AMR competitive - it's about him personally. That cannot continue.

Management should not be taking stock options at a time like this, when AMR is financially under-performing every other major U.S. carrier. I have been an ardent defender of those stock options - which I believed and still believe were well deserved several years ago when AMR was, by contrast, outperforming just about all of its legacy peers (then in bankruptcy). Today, however, they are inappropriate. The stock options are not AA's problem, but they are creating a massive problem for AA - they are antagonizing already-radicalized union labor and depressing morale.

AMR need not file for bankruptcy, but it does need to make some substantive changes in the way it does business.

He did get concessions. He did keep them out of bankruptcy. But, he has not lead the airline to profitability. That is his job, and he is not meeting the expectations of that job. It is time for a serious change, or otherwise, the money will eventually run out.

While I am no CEO, and I would be the first to admit that I am not a good armchair CEO... But Obviously, there needs to be reductions in flying, trimming the routes that are in the red. Lowering capacity on routes that are not getting the cheeks in the seats. Parking planes that are not helping with the fuel situation. Reduction in management, and reduction in management pay (bonuses should only be paid when these guys and gals get results.)

Some airlines payout bonuses to employees. Like US Airways pays out if the airline meets or exceeds goals of on-time, baggage, and customer service. If the goals are not met, they don't get a payout. Why in the hell do executives and management get bonuses when they fail miserably?

STOP THE BONUSES for the execs and management if they don't cut the mustard. It almost seems like Aprey and team are just hoping that a miracle happens. No miracles are coming anytime soon. It is time to pee or get off the pot. I hate to be so harsh, but the reality of seeing AA fail is very real. I know that sounds harsh too, but we are not witnessing AA being successful. If AA does not make some dramatic changes, we may very well be watching one of our biggest airlines fail.

I send my deepest sympathies to the AA employees that try so hard. Nothing is more frustrating than when you give your all, and still hear more depressing news about financials. The employees of this airline are doing a hell of a job. The service is not the problem. It is the leadership.

Sorry if I am rambling.. Sorry if I offended anyone... I just can't stand to watch a national treasure in such financial crisis....  



I Am A Different Animal!!
User currently offlineRising From United States of America, joined May 2010, 272 posts, RR: 1
Reply 18, posted (3 years 5 months 9 hours ago) and read 3844 times:

Quoting texan (Reply 5):
While I think it is criminal to run away from the pension plan you guaranteed to your employees and tell the government to pick up the slack

Taxpayers have never paid any pension payment for a private employer. Companies with defined-benefit pensions, such as AMR, are required to pay into an insurance pool, called the Pension Benefit Guaranty Corporation (PBGC). The government owns it, but no government funds are used in distributing benefits. AMR pays premiums to insure that in the event that they are no longer able to fund their pensions, the insurance pool will cover their employees. While unfortunate, I would hardly call having to use the insurance you have paid for criminal. http://www.pbgc.gov/about/how-pbgc-operates.html



If it doesn't make sense, it's because it's not true.
User currently offlineAsiaflyer From Singapore, joined May 2007, 1136 posts, RR: 0
Reply 19, posted (3 years 5 months 9 hours ago) and read 3819 times:

Quoting Rising (Reply 18):
Taxpayers have never paid any pension payment for a private employer.

Really?

"A General Motors bankruptcy could become a nightmare for the federal government’s Pension Benefit Guaranty Corp.

That’s because the automaker could dump as much as $13.5 billion in unfunded pension liabilities onto the U.S. agency that takes over troubled pension plans—the largest ever from a single company—if GM were unable to fund its U.S. defined-benefit plans and terminated them.

The claim would be almost twice as large as the current record of $7.5 billion from the 2005 termination of the Chicago-based UAL Corp.’s United Airlines pension plans. "

http://www.workforce.com/section/new...-135-billion-pension-liability.php



SQ,MI,MH,CX,KA,CA,CZ,MU,KE,OZ,QF,NZ,FD,JQ,3K,5J,IT,AI,IC,QR,SK,LF,KL,AF,LH,LX,OS,SR,BA,SN,FR,WF,1I,5T,VZ,VX,AC,NW,UA,US,
User currently offlineRising From United States of America, joined May 2010, 272 posts, RR: 1
Reply 20, posted (3 years 5 months 9 hours ago) and read 3803 times:

Quoting Asiaflyer (Reply 19):
Really?

I would encourage you to follow the link in my original post to the agency's website and learn more about how pension defaults work in the United States.

"PBGC receives no funds from general tax revenues. Operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the plans."

The article you cite is correct. The unfunded liabilities are transferred to the PBGC, but that does not mean that money used to pay benefits comes from the government. It just means the liability has moved from the company, to the agency. That is the point of the program. The idea is to allow the company to shed the burden it can no longer afford to allow the company to stay in business and protect jobs.

To default on a pension, you must prove, in court, as UAL Corp. did, that if you do not terminate your pension plans, your company will be forced to liquidate.

.

[Edited 2011-04-24 23:20:17]


If it doesn't make sense, it's because it's not true.
User currently offlineLAXintl From United States of America, joined May 2000, 25406 posts, RR: 49
Reply 21, posted (3 years 4 months 4 weeks 1 day 21 hours ago) and read 3573 times:

Quoting STT757 (Reply 7):
FA's not happy;

Off course they are not happy. They must posture someway being in the midst of labor negotiations.

I guess the fact that they are better off compared to many of their industry peers does not matter.

Quoting F9Animal (Reply 17):
Why in the hell do executives and management get bonuses when they fail miserably?

Because they did not fail miserably.

The manner the companies executive performance share plan was established in 2008 sets certain annual performance targets. As with many companies, a good chunk of the earnings potential for leadership teams are on a at-risk basis with pay for performance being at the heart of it.

In regards to this years payments, as AMR shares have performance poorly against their peers the executives actually did not fully meet their target metrics and in turn only earned 50% of their potential payments.

Seems to me the program did exactly what it was supposed to, and reigned in the payments based on the relative weak performance for AMR the year prior. At the last airline I worked at last, similarly our pay (upwards of 50%) was based on reaching established personal and company targets set by the BoD.



From the desert to the sea, to all of Southern California
User currently offlineF9Animal From United States of America, joined Dec 2004, 5055 posts, RR: 28
Reply 22, posted (3 years 4 months 4 weeks 1 day 19 hours ago) and read 3475 times:

Quoting LAXintl (Reply 21):
Because they did not fail miserably.

The manner the companies executive performance share plan was established in 2008 sets certain annual performance targets. As with many companies, a good chunk of the earnings potential for leadership teams are on a at-risk basis with pay for performance being at the heart of it.

In regards to this years payments, as AMR shares have performance poorly against their peers the executives actually did not fully meet their target metrics and in turn only earned 50% of their potential payments.

Seems to me the program did exactly what it was supposed to, and reigned in the payments based on the relative weak performance for AMR the year prior. At the last airline I worked at last, similarly our pay (upwards of 50%) was based on reaching established personal and company targets set by the BoD.

I still feel this is complete BS. 50%? Seriously? These folks did not deserve 2%. All or none as far as I am concerned. The airline is hemoraging money, and NOBODY deserves a bonus when any company will lose up to a billion dollars in a year. In fact, no exec should even be allowed to run the airline with the expected losses coming. Change is obviously needed. If I were the CEO of AA, and got a 50% bonus, I would be ashamed of myself. In fact, I would refuse the bonus, because I would know that I did not deserve it. This sounds like pure greed to me.



I Am A Different Animal!!
User currently offlineLAXintl From United States of America, joined May 2000, 25406 posts, RR: 49
Reply 23, posted (3 years 4 months 4 weeks 1 day 19 hours ago) and read 3448 times:

Quoting F9Animal (Reply 22):
I still feel this is complete BS. 50%? Seriously?

I guess we view the situation from two sides of the coin.

To you, they got a 50% bonus, to me they only managed to get 50% of their potential performance based income for the year - a HUGE cut in their pay.

Quoting F9Animal (Reply 22):
In fact, no exec should even be allowed to run the airline with the expected losses coming.

Well infact when a companies do bad, one often needs to pay extra or provide retention program to maintain or attract a management team. Thats why when airlines get close to BK, or enter BK, there most often are retention programs launched to ensure there is not a mass turnover of management.



From the desert to the sea, to all of Southern California
User currently offlinenorcal From United States of America, joined Mar 2005, 2459 posts, RR: 5
Reply 24, posted (3 years 4 months 4 weeks 1 day 3 hours ago) and read 3200 times:

Quoting LAXintl (Reply 23):
To you, they got a 50% bonus, to me they only managed to get 50% of their potential performance based income for the year - a HUGE cut in their pay.

BONUS, implies they did something well i.e. got a profit. Any manager worth their salt there would refuse bonuses until the company returns to profitability. 50% pay cut? Really? I guess poor Mr. Arpey can only buy a BMW this year instead of the Rolls Royce he had his eye on.

Quoting LAXintl (Reply 21):
Off course they are not happy. They must posture someway being in the midst of labor negotiations.

The biggest issue for labor is that they are constantly asked to give and give and give while management still gets millions in "performance bonuses."

The phrase, "lead by example" comes to mind. A great leader never asks his people to do something he isn't willing to do himself.

AMR management refusing bonuses until the airline returns to profitability would go a long way in mending the fences with labor, it might actually be the spark needed to get a real compromise done. If Southwest was struggling like AMR you would never see their management continue to take bonuses, they'd get right down in the trenches with their employees. That type of corporate culture is the difference between AMR and Southwest and key to Southwest's success. It's not cheaper pay because Southwest pays the most out of any carrier (save FedEx maybe) in the US. Southwest affords those pay rates because they are the most productive work force and that productivity comes from the fact that they love their company and trust their management and are willing to go extra mile to make things work.

AMR employees on the other hand sacrificed a lot in 2003 only to watch AMR management feed at the bonus trough time and time again regardless of the company's performance. That absolutely destroys employee morale but since AMR can't quantify employee morale on a spread sheet they simply don't care and it will continue to be their downfall.

When management produces a profit, by all means give them a bonus, but when you lose $430+ million in 1 qtr and are projected to lose $1 billion in the year how can anyone justify a "performance bonus."

Quoting LAXintl (Reply 23):
Well infact when a companies do bad, one often needs to pay extra or provide retention program to maintain or attract a management team.

It'd be better if they left, AMR needs new management with fresh ideas. Their problems aren't solely labor based. The biggest issue is that AMR has no vision and no balls to go out and compete with Delta and United. This management team is far too timid.


25 TOMMY767 : Arpey really needs to go. He has shown a true lack of innovation and compelling leadership since day one. And I don't give him credit for not entering
26 dirtyfrankd : I think it would be a great idea for Arpey and for other senior executives to not take a salary until the company becomes profitable again, similar to
27 Post contains images F9Animal : I totally understand where you are coming from, and I hope you don't take offense to my post. I am just saddened to see the state of American. I wish
28 LAXintl : I think the term BONUS confuses you. Its really simply At-Risk Performance Based Pay. I've worked under such schemes where by a huge chunk of my earn
29 IrishAyes : Understandable semantics, but at the end of the day, playing by these rules in the rulebook still will not solve AA's problems. IIRC, Bethune and Kel
30 LAXintl : Compensation and target goals are decided and managed by the BoD, not the management group itself. Unlike some airlines that have pretty fixed salari
31 Post contains links norcal : What performance? The company is on the brink of bankruptcy. These guys don't deserve a single dime worth of bonuses. This is just like those idiots
32 AAExecPlat : This is all true right this moment, BUT what happens when payouts exceed the revenue generated by insurance premiums? In 2010, PBGC collected $2.3 bi
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