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AA Exec Gets Grilling From Analyst  
User currently offlineLAXintl From United States of America, joined May 2000, 24853 posts, RR: 46
Posted (2 years 10 months 2 weeks 4 days 20 hours ago) and read 12515 times:

American Airlines VP Corporate Development &Treasure attending today's Deutsche Bank Aviation conference in New York heard some rather blunt comments about the carriers poor financial performance compared to peers.
American Airlines in the last decade has racked up some $12.4 billion in losses.

A couple good ones:

About non-existent earnings -- "At some point, you have to start making money," one analyst said. "You can't run an airline forever losing money."

About focus on only growing in über competitive markets like NYC and LA where yields erode, and continued notion that cost(labor) is the sole issue at AA – “Can't American pull back more "instead of blaming labor" for its problems.”

Though the American executive was honest with some comments of her own back to the audience -- "It goes without saying that our results need to improve."


Story:
American Airlines Exec Faces Critics
http://www.thestreet.com/_yahoo/stor...AHOO&cm_cat=FREE&cm_ite=NA
and
http://aviationblog.dallasnews.com/a...ome-more-from-amr-at-the-deut.html


Can access conference audio at: (registration required)
http://phx.corporate-ir.net/phoenix....pw=788&rdu=&rdt=&upv=2

But in summary however, AA lays its future on a Corner Stone network strategy, building revenues through JV alliances, the announced fleet modernization, and keeping non-fuel expenses essential flat on ASM basis going forward.


From the desert to the sea, to all of Southern California
50 replies: All unread, showing first 25:
 
User currently offlineIrishAyes From United States of America, joined Jan 2008, 2163 posts, RR: 15
Reply 1, posted (2 years 10 months 2 weeks 4 days 20 hours ago) and read 12318 times:

Eh, more or less the same content everybody has already read about. Although, I must say Terry Maxon's amusing style of writing has continually piqued my admiration over the years....but that's neither here nor there.

At a very high level, the article essentially glosses over the usual discourse: Wall street barks, throws out the "B" word, disgruntled AA mgt send a new executive face to NY to nod their head, acknowledge they're lagging, blame weather, fuel, revenue enviroment, natural disasters for their losses, and offer promises that they have a few punches up their sleeve.

Standard operating procedure.

Amongst AA's counter-attacks, I think there are some short term vs. long-term goals they have in stock, and I am hoping that the lower-hanging fruit (improving the slot times at Peking/Haneda, reducing schedules on slower days) gives them the confidence to win in other areas (resolving the labor mess, protecting the yields of its cornerstone hubs, retaining customer loyalty) and they'll be in much better shape to survive in the long-run.

After that, modernized fleet and global alliance-leverage will all be icing on the cake.



next flights: msp-phx-slc, msp-mdw, ord-sju, sju-dfw-ord, msp-dfw, dfw-phl, phl-msp, jfk-icn, icn-hkg-bkk-cdg
User currently offlinecommavia From United States of America, joined Apr 2005, 11426 posts, RR: 61
Reply 2, posted (2 years 10 months 2 weeks 4 days 19 hours ago) and read 12093 times:

Quoting IrishAyes (Reply 1):
Amongst AA's counter-attacks, I think there are some short term vs. long-term goals they have in stock, and I am hoping that the lower-hanging fruit (improving the slot times at Peking/Haneda, reducing schedules on slower days) gives them the confidence to win in other areas (resolving the labor mess, protecting the yields of its cornerstone hubs, retaining customer loyalty) and they'll be in much better shape to survive in the long-run.

After that, modernized fleet and global alliance-leverage will all be icing on the cake.

I would add something else to your list: reconfiguring and refreshing the international widebody cabins. The cabins just plain need to be updated, anyway - including a real, 2011 IFE system (as opposed to the 1998 system they have now on the 777s or 1988 system they have on the 767s). This will make AA more competitive and help them retain unit revenue in competitive long-haul markets.

But, the main reason they need to reconfigure the widebodies - especially the 777 - is because AA's current set up, which dates to 1999, is no longer economic in today's market environment. It's too low-density. They need to shrink F (some would say eliminate it altogether, but I think a small 8-seat section is viable), improve J with a lie-flat seat, and use the space to cram in more Y seats.

Part of what's harming AA is that it cannot amortize fixed costs over as many passengers as competitors that generate more ASMs per aircraft, stage length adjusted, because of density. I think United's new international F/J/Y 777 configuration - with lie-flat J and a bigger Y - is probably a great template to start from for AA.


User currently offlinepanamair From United States of America, joined Oct 2001, 4875 posts, RR: 25
Reply 3, posted (2 years 10 months 2 weeks 4 days 18 hours ago) and read 11912 times:
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During the presentation, AA said that the benefits of the JBA with BA and IB were taking longer-than-expected to materialize, but IIRC, in BA's recent earnings announcement for the April - June 2011 period, they already credited the JBA for the improvement in their quarterly performance. Does anyone know why BA has been able to realize some benefits and AA not?

User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 60
Reply 4, posted (2 years 10 months 2 weeks 4 days 18 hours ago) and read 11875 times:

Quoting commavia (Reply 2):
They need to shrink F (some would say eliminate it altogether, but I think a small 8-seat section is viable), improve J with a lie-flat seat, and use the space to cram in more Y seats.

  . Not to mention, they need to work with the pilots union so that a pilot doesn't get to have an F-seat as a crew rest.

They also need 2-3 rows of a "Y+". A "true" Y+ has been a hit with other carriers. QF and BA have it and now CX will have it (regarding OneWorld carriers). AA needs it and will also allow better bookings on AA.com.



"Up the Irons!"
User currently offlinepanamair From United States of America, joined Oct 2001, 4875 posts, RR: 25
Reply 5, posted (2 years 10 months 2 weeks 4 days 18 hours ago) and read 11816 times:
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Quoting Jacobin777 (Reply 4):
Not to mention, they need to work with the pilots union so that a pilot doesn't get to have an F-seat as a crew rest.

While they're at it, maybe they can get the pilots to actually just have ONE J rest seat on the 763/757 instead of the current two? It amazes me that the AA has to tie up two J seats while pilots at other carriers get only one.....


User currently offlineIrishAyes From United States of America, joined Jan 2008, 2163 posts, RR: 15
Reply 6, posted (2 years 10 months 2 weeks 4 days 18 hours ago) and read 11766 times:

Quoting commavia (Reply 2):
But, the main reason they need to reconfigure the widebodies - especially the 777 - is because AA's current set up, which dates to 1999, is no longer economic in today's market environment. It's too low-density. They need to shrink F (some would say eliminate it altogether, but I think a small 8-seat section is viable), improve J with a lie-flat seat, and use the space to cram in more Y seats.
Quoting commavia (Reply 2):
Part of what's harming AA is that it cannot amortize fixed costs over as many passengers as competitors that generate more ASMs per aircraft, stage length adjusted, because of density. I think United's new international F/J/Y 777 configuration - with lie-flat J and a bigger Y - is probably a great template to start from for AA.

Based on this, do you think it would be more practical for AA to:

1). Eliminate F all together on their 777s, and instead offer a BusinessFirst-esque premium cabin, allowing them to add some more Y seats and grow their J cabin, offering a 2-class configuration. This would also allow them to align both of their 777 product offerings with their 767s more closely, similar to what AC, CO, DL and others have done...

2). Reduce the size of F and instead offer a premium economy offering in the form of a four-class configuration, so that they are able to offer F on very premium routes where there is a demand (EZE, NRT, LHR, etc), just like BA, UA, etc or

3). Offer some sort of hybrid of both?

Quoting panamair (Reply 3):
During the presentation, AA said that the benefits of the JBA with BA and IB were taking longer-than-expected to materialize, but IIRC, in BA's recent earnings announcement for the April - June 2011 period, they already credited the JBA for the improvement in their quarterly performance. Does anyone know why BA has been able to realize some benefits and AA not?


Debated on whether or not to include a snarky response here, but this statement just makes me roll my eyes - typical passive response AA would use. Since revenues are shared between AA, BA and IB on their TATL routes thanks to the JBA, you would think that if one saw improvements, then all three would. At best guess, I would imagine that AA's high cost structure dilutes the impact the JBA has on their bottom line than at BA - but that is just speculation. I certainly hope this is not the case, otherwise it makes me feel a lot less confident in AA's management, since they really seem to be touting the benefits of the JBA in helping AA's turnaround...



next flights: msp-phx-slc, msp-mdw, ord-sju, sju-dfw-ord, msp-dfw, dfw-phl, phl-msp, jfk-icn, icn-hkg-bkk-cdg
User currently offlineLAXtoATL From United States of America, joined Oct 2009, 1590 posts, RR: 2
Reply 7, posted (2 years 10 months 2 weeks 4 days 18 hours ago) and read 11641 times:

Quoting panamair (Reply 3):
Does anyone know why BA has been able to realize some benefits and AA not?

It's called bullchit (sorry, I mean spin). The way it is set-up, each airline shares equally (equally based on the percentage of assets they have involved in the operation, so it might not be exactly even but it should be reasonably equal). Therefore either one or both of them are lying. If it is true that the airlines are yielding different results from the same business, then one of those airlines has some serious flaws in their business model.

* I personally never expected the JBA to have a big impact on the businesses to begin with. If they really believed it would produce dramatic improvement they would have made the regulatory concessions and started the JBA several years ago. Of course having the JBA makes them more competitive than they were, but I don't see any dramatic change in the competitive landscape as a result.


User currently offlinegoldenstate From United States of America, joined Feb 2010, 566 posts, RR: 4
Reply 8, posted (2 years 10 months 2 weeks 4 days 17 hours ago) and read 11516 times:

Quoting commavia (Reply 2):
I would add something else to your list: reconfiguring and refreshing the international widebody cabins.
Quoting commavia (Reply 2):
Part of what's harming AA is that it cannot amortize fixed costs over as many passengers as competitors that generate more ASMs per aircraft, stage length adjusted, because of density. I think United's new international F/J/Y 777 configuration - with lie-flat J and a bigger Y - is probably a great template to start from for AA.

Revamping onboard product and improving B777 CASM performance would be possible in a single pass of the fleet through the mod line, and that type of project strikes me as something that should have been a top priority for AA at least 2 years ago. Would have produced immediate returns on both the revenue and expense sides of the equation.

Quoting IrishAyes (Reply 6):
Based on this, do you think it would be more practical for AA to:

1). Eliminate F all together on their 777s, and instead offer a BusinessFirst-esque premium cabin, allowing them to add some more Y seats and grow their J cabin, offering a 2-class configuration. This would also allow them to align both of their 777 product offerings with their 767s more closely, similar to what AC, CO, DL and others have done...

2). Reduce the size of F and instead offer a premium economy offering in the form of a four-class configuration, so that they are able to offer F on very premium routes where there is a demand (EZE, NRT, LHR, etc), just like BA, UA, etc or

Given AA's network and the way they utilize their 777s, I would imagine there is a market for F, just not a 16 seat cabin that takes up all of the A-zone. Further, with the stated intent of the Cornerstone strategy being to focus on high revenue traffic in the largest and most lucrative business markets, a premium cabin redesign is well overdue.

There is a market within the US for a high quality international product. I think there's a valid question as to how big is too big. Both DL and UA will have to contend with service consistency and quality issues for a long time to come, perhaps indefinitely. For AA, this could have been a window of opportunity to completely reinvent its products, invest in the business, and drive a laser focus on quality and operational fundamentals.

However, that would have required them to work out their labor issues and put the business on a sustainable cost footing. Since that has yet to happen and appears unlikely to happen in the forseeable future, it appears AA will continue to pursue a largely reactive and defensive strategy. At this point, the question in my mind is how much longer that will be possible.


User currently offlinerising From United States of America, joined May 2010, 269 posts, RR: 1
Reply 9, posted (2 years 10 months 2 weeks 4 days ago) and read 8646 times:

Jamie Baker, from JP Morgan Chase, also likes to ask tough questions of AA's executives on the conference calls.

I remember recently he said something along the lines of "You all seem to talk about how you are focused on the long-term, but my question is when does the short-term become important for you."

Arpey seems like a nice man, but there does not seem to be, at least to investors, a sense of urgency to make a profit. And you can't blame unions. Their purpose is to advocate for their members, not the run the airline. The employees are paid by and work for management, not their union. There are two parties to every contract, and management agreed to it too. In the final analysis, it's management's job is to make a profitable company.

It's unfortunate that company with sound a proud brand and a proud history of cost control just cannot seem to manage that feat. Their investors, employees, and customers deserve better.



If it doesn't make sense, it's because it's not true.
User currently offlinecommavia From United States of America, joined Apr 2005, 11426 posts, RR: 61
Reply 10, posted (2 years 10 months 2 weeks 3 days 23 hours ago) and read 8264 times:

Quoting rising (Reply 9):
Arpey seems like a nice man, but there does not seem to be, at least to investors, a sense of urgency to make a profit.

I suppose his take is that as long as the company continues to generally generate operating cash flow, and can service its debt, he can keep enough of the institutional investors at least tolerant of the strategy. We'll see how that works out.

Quoting rising (Reply 9):
And you can't blame unions.

"Blame" the unions? No - certainly not - and certainly not for all or even most of AA's troubles.

But, on the flip side, I think it is perfectly fair and objective to recognize that AA's business model does carry certain legacy costs that post-bankruptcy competitors have ejected in bankruptcy, and that new competitors have never had to begin with, and that some of those legacy costs do - in fact - stem from union contracts.

Other carriers have moved with greater speed, flexibility and/or agility to jettison aspects of their business model and cost structure that were no longer deemed competitive. AA has been relatively slow to respond in many of these areas - through management incompetence or intransigence, or union contract inflexibility, or probably a mix of both.

Quoting rising (Reply 9):
Their purpose is to advocate for their members, not the run the airline.

Absolutely right. I don't think anybody could reasonably criticize the unions for advocating for their members and trying to get the best possible deal.

Quoting rising (Reply 9):
There are two parties to every contract, and management agreed to it too.

True, but sort of a red herring. Those contracts are from 2003 - before every one of AA's peers save Continental filed for bankruptcy, and just at the beginning of the dramatic growth of young low-fare carriers. The market and competitive dynamics change with time.

I'm sure if AA management knew back in 2003 that within five years Delta, Northwest, United and USAirways (twice) would have filed for Chapter 11, and jet fuel prices would have hit all-time highs, they probably would have pressed for deeper concessions preemptively in 2003 to avert bankruptcy.


User currently offlineSean-SAN- From United States of America, joined Aug 2002, 768 posts, RR: 1
Reply 11, posted (2 years 10 months 2 weeks 3 days 23 hours ago) and read 8042 times:

Quoting panamair (Reply 5):

This is common with any international airline that does not have a crew-rest section built into the airframe. Even mid-east airlines like EK and Qatar have business class or first class seats cordoned off for flight crew.

The reason to restrict the next seat is also obvious.. you don't want an active duty flight crew, who is trying to sleep or relax, next to someone talking their head off, drinking alcohol, watching movies, or entertaining their kid.


User currently offlineapodino From United States of America, joined Apr 2005, 4234 posts, RR: 6
Reply 12, posted (2 years 10 months 2 weeks 3 days 23 hours ago) and read 7902 times:

With the way AA is going now, there is major pressure on Arpey from all sides with AA bleeding money at a rate comparable to the US Congress. The Employees are fed up because they want new contracts and feel that Management has been lining their own pockets. Shareholders are fed up because of the constant losses. And the shareholders are starting to call out Arpey and his henchmen on it too.

Nobody wants to see a Chapter 11, because it would really destroy the good things about the union contracts from an employee standpoint, and on the shareholder side it would wipe out their shares making them worthless. Arpey is under a lot of heat right now, and I think the shareholders have just about run out of patience with him at this point. Time will tell how this all plays out.


User currently offlinejamake1 From United States of America, joined May 2004, 1005 posts, RR: 2
Reply 13, posted (2 years 10 months 2 weeks 3 days 23 hours ago) and read 7775 times:

Quoting commavia (Reply 10):
I'm sure if AA management knew back in 2003 that within five years Delta, Northwest, United and USAirways (twice) would have filed for Chapter 11, and jet fuel prices would have hit all-time highs, they probably would have pressed for deeper concessions preemptively in 2003 to avert bankruptcy.

USAirways filed bankruptcy for the first time on August 11, 2002. United filed for bankruptcy on December 9, 2002. Hence, both carriers were well into the process when AA underwent their out-of-court restructuring in 2003.



United's B747-400. "She's a a cruel lover."
User currently offlinegoldenstate From United States of America, joined Feb 2010, 566 posts, RR: 4
Reply 14, posted (2 years 10 months 2 weeks 3 days 23 hours ago) and read 7773 times:

Quoting commavia (Reply 10):
I suppose his take is that as long as the company continues to generally generate operating cash flow, and can service its debt, he can keep enough of the institutional investors at least tolerant of the strategy. We'll see how that works out.

Free cash flow is a better indicator of sustainability and AMR's has been negative for awhile now. On the most fundamental level, the company is not financially sustainable because it is not generating enough cash to maintain a steady state, let alone grow the business. Further, I'm not sure what the "strategy" is other than to hope that everyone else's costs rise while AMR's remain constant. That outcome is unlikely, and made even more unlikely by the kinds of decisions that AMR has been making lately.

Quoting commavia (Reply 10):
Those contracts are from 2003 - before every one of AA's peers save Continental filed for bankruptcy, and just at the beginning of the dramatic growth of young low-fare carriers.

Your timelines are off. In 2003 UAL and US Air (first time) were operating under bankruptcy protection, and DAL was clearly distressed. A crystal ball was not necessary to conclude that competitors were going to work toward drastically leaner cost structures.


User currently offlineLHRFlyer From United Kingdom, joined Apr 2010, 812 posts, RR: 1
Reply 15, posted (2 years 10 months 2 weeks 3 days 23 hours ago) and read 7718 times:

Regarding the JB with BA, there's no doubt it has benefited BA. Its monthly traffic figures show very strong premium traffic growth and load factors are consistently at their highest on North American routes with good year on year gains.

A fairly recent BA investor presentation showed how profit is shared under the joint business and the formula is not as simple as pooling revenue and costs. See slide 129 of this:

http://media.corporate-ir.net/media_.../01_ID_2010_Full_presentations.pdf

On a separate matter, the AA PowerPoint template is a shocker - not what you expect of a major public company!

[Edited 2011-09-14 10:09:16]

User currently offlinemogandoCI From , joined Dec 1969, posts, RR:
Reply 16, posted (2 years 10 months 2 weeks 3 days 22 hours ago) and read 7517 times:

Quoting commavia (Reply 10):
I don't think anybody could reasonably criticize the unions for advocating for their members and trying to get the best possible deal.

sorry, unions have always been "give us 100% of what we demand, or else strike" type of zero-sum-game attitude. the union thug bosses have always been "us against them" instead of a "working together" approach.

unions always protect the lazy, unproductive, uncompetitive, and weak employee. As long as nothing illegal happened, they can continue to leech off the hardworking.

you think AA lost DFW-PEK because of lack of 747? it's the pilots union

what do we call an organization that have members blindly follow marching orders from the top and lack the capability of criticize itself? a cult


User currently offlinecommavia From United States of America, joined Apr 2005, 11426 posts, RR: 61
Reply 17, posted (2 years 10 months 2 weeks 3 days 22 hours ago) and read 7482 times:

Quoting apodino (Reply 12):
Shareholders are fed up because of the constant losses. And the shareholders are starting to call out Arpey and his henchmen on it too.

Well - shareholders don't seem to be fed up enough to revolt against Arpey and fire him. The Board of Directors obviously - at least until now - seems to be sufficiently satisfied with his job performance not to fire him, and the company's major institutional shareholders don't really seem to be making any particularly public issue of him. At least not yet.

Quoting jamake1 (Reply 13):
USAirways filed bankruptcy for the first time on August 11, 2002. United filed for bankruptcy on December 9, 2002. Hence, both carriers were well into the process when AA underwent their out-of-court restructuring in 2003.

My mistake - apologies. Let me restate: AA agreed to those deals before any of its competitors had secured their post-bankruptcy union contracts, and before two of its competitors filed (and one filed for a second time).

Nonetheless, my point is still the same: with United and USAirways (first go-around) in active bankruptcy proceedings at the time, and with Delta, Northwest and USAirways (round two) still a bit away from filing, AA did not at that time have a meaningful sense of where their competitors' labor costs post-bankruptcy would be, other than that it would of course be lower. Thus, AA sought nearly $2B (unions would argue it was worth more) in concessions thinking that would be sufficient.

Quoting goldenstate (Reply 14):
Free cash flow is a better indicator of sustainability and AMR's has been negative for awhile now. On the most fundamental level, the company is not financially sustainable because it is not generating enough cash to maintain a steady state, let alone grow the business.

I'm not arguing that their present financial position is sustainable - I was simply attempting to guess at what Arpey's thinking would be.

I agree with you that the company is today not generating sufficient amounts of free cash flow to financing operations long-term going forward. No question about that. It will be interesting to see what impact the fleet changes coming in the next few years will have on that picture. These new aircraft should have a fairly substantial, immediate impact on cash flow - both with the monthly lease payments, and the dramatically lower fuel consumption, and the maintenance holiday.

Quoting goldenstate (Reply 14):
Further, I'm not sure what the "strategy" is other than to hope that everyone else's costs rise while AMR's remain constant.

The company's answer would be that the "strategy" is to concentrate capacity on the five cornerstones, grow the joint business agreements with BA/Iberia and JAL, and secure more corporate contracts by doing the first two. And, now, I guess also turning over just about all of the MD80 and 757 fleet within five years is also now a core central element of the "strategy."

Again - I'm not arguing for or against that strategy - I was simply stating that it was what management is advertising at this time.


User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 60
Reply 18, posted (2 years 10 months 2 weeks 3 days 22 hours ago) and read 7430 times:

Quoting commavia (Reply 10):
Quoting rising (Reply 9):
And you can't blame unions.

"Blame" the unions? No - certainly not - and certainly not for all or even most of AA's troubles.

The hundreds of millions    they have been blowing off, er, spending every year on over-bloated salaries they could have spent on interiors, more routes and stayed competitive on other routes. Not to mention, lower debt and have better credit ratings.

Quoting panamair (Reply 5):
Quoting Jacobin777 (Reply 4):
Not to mention, they need to work with the pilots union so that a pilot doesn't get to have an F-seat as a crew rest.

While they're at it, maybe they can get the pilots to actually just have ONE J rest seat on the 763/757 instead of the current two? It amazes me that the AA has to tie up two J seats while pilots at other carriers get only one...

  



"Up the Irons!"
User currently offlineozark1 From United States of America, joined Mar 2006, 435 posts, RR: 0
Reply 19, posted (2 years 10 months 2 weeks 3 days 22 hours ago) and read 7082 times:

Quoting rising (Reply 9):
Jamie Baker, from JP Morgan Chase, also likes to ask tough questions of AA's executives on the conference calls.

I remember recently he said something along the lines of "You all seem to talk about how you are focused on the long-term, but my question is when does the short-term become important for you."

Arpey seems like a nice man, but there does not seem to be, at least to investors, a sense of urgency to make a profit. And you can't blame unions. Their purpose is to advocate for their members, not the run the airline. The employees are paid by and work for management, not their union. There are two parties to every contract, and management agreed to it too. In the final analysis, it's management's job is to make a profitable company.

It's unfortunate that company with sound a proud brand and a proud history of cost control just cannot seem to manage that feat. Their investors, employees, and customers deserve better

You are right on the money with this comment.


User currently offlineapodino From United States of America, joined Apr 2005, 4234 posts, RR: 6
Reply 20, posted (2 years 10 months 2 weeks 3 days 21 hours ago) and read 7035 times:

Quoting commavia (Reply 17):
Well - shareholders don't seem to be fed up enough to revolt against Arpey and fire him. The Board of Directors obviously - at least until now - seems to be sufficiently satisfied with his job performance not to fire him, and the company's major institutional shareholders don't really seem to be making any particularly public issue of him. At least not yet.

They may not be doing it publicly yet, but with a lot of analysts I have been reading lately, they all feel that AA needs a new direction. And we don't know what the BOD is doing. It is obvious that Wall Street thinks that AA needs a new direction, but a lot of the power structure happens behind the scenes and isn't really public (Which is a good thing because that will have an obvious impact on the stock price).

Remember not long ago Phil Trennary was ousted as CEO of Pinnacle. I don't remember seeing any rumblings about his performance or hints from the BOD that it was going to happen. Just because it's not happening publicly doesn't mean its not happening. Wall Street is obviously fed up with AMR at the moment. What will happen as a result?


User currently offlinecommavia From United States of America, joined Apr 2005, 11426 posts, RR: 61
Reply 21, posted (2 years 10 months 2 weeks 3 days 21 hours ago) and read 6859 times:

Quoting apodino (Reply 20):
They may not be doing it publicly yet, but with a lot of analysts I have been reading lately, they all feel that AA needs a new direction.

Many analysts have expressed such beliefs in the recent past - that is true.

Although, the cynical among us might suggest that this is the same industry that missed Enron, sub-prime, and much else of what has occurred in the last few years, so perhaps their credibility on judging the relative long-term prospects for a company or a strategy are questionable. I think that's oversimplifying and at least partially unfair, but nonetheless I think it may have some slight amount of truth to it.

Quoting apodino (Reply 20):
And we don't know what the BOD is doing.

Well, the Board knows more about AMR's finances than you, me, or any analyst on Wall Street. At least to date, the Board has been unanimously supportive of Arpey and his management team. That could very much change - and at any moment - that is true. But, alas, that is what I have to go on at this point.

Quoting apodino (Reply 20):
Just because it's not happening publicly doesn't mean its not happening.

No question. I was not arguing that these things are aren't going on behind the scenes - merely that there is no evidence of it at this point. You can't prove that it is happening, I can't prove that it isn't. Only time will tell.

Quoting apodino (Reply 20):
Wall Street is obviously fed up with AMR at the moment.

Well, again, when you say "Wall Street" is "fed up" with AMR, you're referring specifically to a group of analysts who clearly do have strong and negative opinions about AMR (although, I might add, there have been other analysts and stock-watchers recently who have contrarily offered more positive assessments).

However, nonetheless, again, the more cynical among us - though not necessarily me - would perhaps argue that Wall Street is focused too much on the short-term, and not the long-term.

I, myself, fall somewhere in the middle. I believe the situation is serious, though not necessarily as "critical" or "terminal" as some Wall Street analysts' assessments would suggest. I agree that the long-term should be the focus and that the short-term eventually has to stabilize and improve as an indication of the improving long-term. To that end, AMR's performance is and has been lacking - absolutely no question about that.


User currently onlineckfred From United States of America, joined Apr 2001, 5178 posts, RR: 1
Reply 22, posted (2 years 10 months 2 weeks 3 days ago) and read 5714 times:

My father-in-law is a retired business professor, having taught in the Atlanta area for a number of years. So, he generaly had a few Delta employees among his students, and he would discuss Delta and the airline industry.

Since deregulations, airlines have been skittish of doing dramatic things. That's not to say they haven't, but management understands that anything new can become a major money loser, if competitors don't undertake similar initiatives.

AA tried to simplify air fares in the early 1990s, trying to eliminate the myriad of fares with restrictions galore for first, full-fare coach, 7-day advance purchase, and 21-day advance purchase. IIRC correctly, NW responded with a fare sale, and a summer fare war broke out. No one made money in the second and third quarters of that year.

Then, AA tried More Room Throughout Coach. Although UA had Economy Plus, no one decided to remove seats from their planes, and AA wasn't able to charge the premium fares that it had planned on. Take out 10 seats in an MD-80 with no increase in fares or increase in passenger volume, and the revenue numbers become very disheatening.

Granted, the myriad of fees (checked bags, preferred seats, early boarding, rebooking, food in coach, talking to a live agent, etc.,) have been ideas that one airline has started and then adopted across the industry. But AA hasn't had any kind of idea that would lure passengers from other carriers, and it appears that it isn't about to try anything innovative that would cost customers.


User currently offlinebonusonus From United States of America, joined Nov 2009, 403 posts, RR: 0
Reply 23, posted (2 years 10 months 2 weeks 2 days 23 hours ago) and read 5690 times:

Quoting commavia (Reply 2):
use the space to cram in more Y seats.

So you're saying they need to go ten-abreast?


User currently offlineIrishAyes From United States of America, joined Jan 2008, 2163 posts, RR: 15
Reply 24, posted (2 years 10 months 2 weeks 2 days 23 hours ago) and read 5652 times:

Quoting ckfred (Reply 22):
Granted, the myriad of fees (checked bags, preferred seats, early boarding, rebooking, food in coach, talking to a live agent, etc.,) have been ideas that one airline has started and then adopted across the industry. But AA hasn't had any kind of idea that would lure passengers from other carriers, and it appears that it isn't about to try anything innovative that would cost customers.

And again, this breaks things down into the short term vs. long term goals that AA needs to recognize, establish and meet (if not exceed) as key to survival.

Ancillary fee practices have generated HUGE revenue streams for all legacy carriers. Take that out of the picture, and AA looks great on paper. While I agree they need visionary leaders, innovative ideas and longer-term thinking in order to win in the future, it is imperative that they navigate their way through this mess that they're in with their cost structure.

Having not had the chance to reorganize their cost problems in Ch. 11, nor through a merger with another carrier (as all of their competitors - DL, UA, US, CO and NW have enjoyed), AA has been put at a major disadvantage.

What I would love to hear, more than anything, is some sort of concrete, measurable statement from an AA exec assuring us that they have made a breakthrough with their short-term issues, period.



next flights: msp-phx-slc, msp-mdw, ord-sju, sju-dfw-ord, msp-dfw, dfw-phl, phl-msp, jfk-icn, icn-hkg-bkk-cdg
25 norcal : Oh give the anti-union rhetoric a rest, a strong union doesn't doom an airline to failure. Poor management/employee relationships destroy airlines. S
26 micstatic : While I agree with you that AA management should have their house cleaned first, I doubt that will be enough. The work rules/compensation for labor w
27 ual777 : Where do you suggest they take their break? Who exactly is overpaid? The majors could save hundreds of millions of dollars by treating their pilots b
28 Post contains images fxramper : It's the same old show the execs serve up to analysts. They'll tell them what they want to hear to keep the stock some what favorably rated. I wish I
29 ckfred : Hindsight is 20:20, but the bankruptcy process is a miserable way to fix things. It's bad enough that a publicly-traded company has to satisfy Wall S
30 washingtonian : Not so much. United is pretty close to being consistant. All international aircraft will have lie-flat premium seats and AVOD up front, and all but t
31 Post contains links and images Jacobin777 : Something like this: http://www.airliners.net/photo/KLM--...d=585bb9d334899b748a790bd6ee8de007 Market value/market forces has clearly dictated that A
32 genybustrvlr : hear hear
33 norcal : It's more about respect than the money. AA employees sacrificed a ton in 2003 with the concessionary contracts they signed. The employees cared a lot
34 rdh3e : Just for argument's sake, why can't they share the same crew rest as the FA's? Too good for that? I'm just asking, I have no stake in the conversatio
35 Post contains images delta2ual : Except all the CO aircraft that still need Y+ installed and converting some 2-class to 3-class and vice versa on both fleets; service delivery standa
36 Post contains links Jacobin777 : Unions have gone by the way of the black and white tv over the past 80 years. There is a reason why private employers don't have unions and why most
37 norcal : Ok, not disagreeing with those facts. The airline industry is very different from the rest of the private sector because of the RLA and most who work
38 Post contains links LAXintl : Today AA put out its "Eagle Eye" investor update, and no things are not pretty. One big note was that expected cash will be down a huge $1bil from its
39 commavia : To be expected. They're heading into the lean months of the year. This is basically the same pattern of the last five years: cash balance builds some
40 ckfred : norcal: Let's say that the Board of Directors decides that Gerard Arpey is not going to lead AA back to sustained profitability and forces him to bow
41 LAXintl : Expected? This is Q3 we are talking about - the strongest quarter of the year. A liquidity drop of $1bil in mere 3-months during a quarter when you a
42 mogandoCI : unions should be about "fair pay," but instead, today it's mostly about "bullying." it's entirely about my-way-or-the-highway and never about comprom
43 commavia : Ah - thought this Eagle Eye was Q4 guidance, not Q3 estimates. Either way, after reading a bit more detail, I think your characterization of this cas
44 micstatic : I don't think we have many people on here defending bonuses for executives at companies who lose money. Fully agree. That is alarming, as well as the
45 LAXtoATL : The capex is a little high but that number would normally be in the hundreds of millions anyway. The $340m is not debt retirement, that is debt repay
46 norcal : Definitely not someone inside of AMR Ideally I would pick Bethune or Kelley but neither would likely be available. It's a good old boys network like
47 Post contains links and images Jacobin777 : One can say that of every industry: "industry xyz is very different form the rest of the private sector". ALPA and a few others are quasi-monopolies
48 enilria : My experience with news reporting of stock related compensation is that it is rarely accurate. The reporters that write the articles either don't hav
49 Jacobin777 : While that might be true in a number of cases, the information was taken directly from AA's Corporate Governance. There really wasn't too much of an
50 Post contains images apodino : Last I checked, Stephen Wolf, Frank Lorenzo, Michel LeBlanc, and Glenn Tilton are all available In all seriousness though, I do think they would have
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