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Notes From AA Meeting With Analysts  
User currently offlineB747-437B From , joined Dec 1969, posts, RR:
Posted (11 years 11 months 2 weeks 12 hours ago) and read 1509 times:

On November 6, American Airlines conducted their annual briefing of airline industry analysts regarding the direction that the airline would be taking. The event was held at the AA Center in Dallas for the locals and webcast for those unable to make it there. The audio archive (5.5 hours) is available at the Investor relations section of AA.com

My rough notes from the briefing that featured presentations from Gerard Arpey, Dan Garton, Jeff Cambell and Henry Joyner among others are below :


OVERVIEW

Projected $9b loss industrywide for 2003

Savings target of $4b for AMR

Streamlining primary means to savings
eg. depeaking hub causes reduction of 16 a/c plus reduction of gates at spokes

22% management headcount reduction

Inceased automation (self service and voice recognition) to streamline headcount further

70mil gallons fuel savings via APU use reduction and single engine taxi requirements

Government lobbying in progress to reduce taxes - OPPOSES ATSB loan for UAL

AA Pilot elected Lt.Governor of Vermont

62% increase in government taxes over 5yrs - ranges between 15%-45% of total fare

Wants elimination of security surcharge paid by pax.

FINANCIAL POSITION (Q3 end)

$2.8b cash
$4.2b unencumbered assets (inc. flight equipment)

F100 fleet written down to ZERO value - looking to sell at attractive terms

possible sale of non-core assets ahead such as WSpan stake, etc...

"Strong relative liquidity"

Revenue performace deteriorating

5% worse year-over-year RASM decline than competition caused by a) more RJs on lucrative routes, b) disproportionate exposure to discount carriers, c) drop in business travel affects AA markets more

NETWORK ISSUES

85% capacity in Domestic and South America UNDERPERFORMING

6% unit revenue drop in Domestic and 9% drop in LatAm

TATL and TPAC showing solid growth again

LHR - still drives absolute revenues, but shows LARGEST RELATIVE DECLINE IN REVENUE of any station

77% of route network has direct competition from LCCs - corresponding yield hit

2.4% increase in Intl ASMs planned for 2003, together with 8% decrease in Domestic

Big decreases in South American routes after winter schedule, increases in Mexico and Carib routes

9% reduction in transcon flying in 2003

AUS, SJC will see HUGE cuts in 2003

RJs will comprise 30% of hub flights by end 2003, 45% in STL

All STL flights will operate under AX code rather than AA

Possible domestic codeshare with AS being considered

Reducing fleet and subfleet types to 6 by 2003

Transitioning 763 and AB6 fleet to all 2-class - 777s will stay 3-class but only to LHR, Asia, South America

MARKETING

30% revenue comes from pax. on full fare unrestricted tix

Load Factors - 72% avg --> variance from 92% Sunday afternoon, 51% Tuesday night

Revenue model being dictated by LCC

Must provide premium services over LCCs for premium revenue gains and then use that to back into cost structure

Yield is 35% CASM premium on routes with LCC competition, but 85% CASM premium on routes with no LCC competition

Top 17% of pax provide 74% of revenue and fly 60% of segments - concentration on retaining those pax

No longer affordable to maintain industry leading services to cater to all segments - hence focus on selected business pax

Premium demand on transcon routes, but all else (inc. intl) bad decrease on premium travel - MAY SEE FURTHER PREMIUM CAPACITY REDUCTIONS

Increase in prices for upgrades and Admiral's Club memberships

SUMMARY

Continued losses through 2003 likely

Cost savings upto $3.5bn likely to be achieved by 2004

Seeking improvements to labor contracts via productivity not pay cuts

No danger of bankruptcy or cashflow pinch in near to mid future


10 replies: All unread, jump to last
 
User currently offlineDonder10 From Canada, joined Oct 2001, 6660 posts, RR: 21
Reply 1, posted (11 years 11 months 2 weeks 12 hours ago) and read 1446 times:

Cheers for that.Some v interesting numbers.Does their pilot agreement include a RJ scope clause?

User currently offlineB747-437B From , joined Dec 1969, posts, RR:
Reply 2, posted (11 years 11 months 2 weeks 8 hours ago) and read 1370 times:

Does their pilot agreement include a RJ scope clause?

Yes, it restricts the number of RJs and Turboprops that can be used by affiliate carriers flying under the "AA" code. Hence, the move to transfer all the STL feeder operations to the "AX" code instead.


User currently offlineCapt.Picard From , joined Dec 1969, posts, RR:
Reply 3, posted (11 years 11 months 2 weeks 8 hours ago) and read 1351 times:

Thanks for info.

What combination of factors do you/did they think were responsible for the big revenue drop at LHR ?? Less business travel, more aggressive competition etc. ??

Rgds


User currently offlineAA61hvy From United States of America, joined Nov 1999, 13977 posts, RR: 57
Reply 4, posted (11 years 11 months 2 weeks 8 hours ago) and read 1345 times:

What about the 777's to LGW?
I knew about the F100's. They had that comming



Go big or go home
User currently offlineJcs17 From United States of America, joined Jun 2001, 8065 posts, RR: 39
Reply 5, posted (11 years 11 months 2 weeks 8 hours ago) and read 1338 times:

Very interesting! You shouldve invited me, being in the DFW area!  Big grin


America's chickens are coming home to rooooost!
User currently offlineSeatback From United States of America, joined Mar 2002, 774 posts, RR: 0
Reply 6, posted (11 years 11 months 2 weeks 8 hours ago) and read 1324 times:

Aren't all feeder flights out of STL AX code?? You didn't mean ALL STL flight would be AX (eliminating AA??) did you?

User currently offlineB747-437B From , joined Dec 1969, posts, RR:
Reply 7, posted (11 years 11 months 2 weeks 8 hours ago) and read 1318 times:

Ref. 777s to LGW - yes I assume that they will run to LGW as well. Dan Garton said "London" and my shorthand jotted down LHR as a reflex action! Sorry!

Ref. AX at STL - the plan is to put the AX code on ALL flights at STL, mainline and feeder, while also maintaining the AA code on the mainline. This will allow "ONLINE" connections to be built using AX codes that will give these flights priority in CRS systems


User currently offlineSearpqx From Netherlands, joined Jun 2000, 4344 posts, RR: 10
Reply 8, posted (11 years 11 months 2 weeks 7 hours ago) and read 1287 times:

So AA mainline will fly under the American Connection code?! Now thats a new switch on a tired tactic (codesharing). Be interesting to see how/if it succeeds.

Duane



"The two most common elements in the universe are Hydrogen and stupidity"
User currently offlineCloudy From , joined Dec 1969, posts, RR:
Reply 9, posted (11 years 11 months 1 week 6 days 21 hours ago) and read 1207 times:

The pilot's union is really going to be ticked about
the STL plan....


User currently offlineUA744Flagship From , joined Dec 1969, posts, RR:
Reply 10, posted (11 years 11 months 1 week 6 days 16 hours ago) and read 1185 times:

I love AA management.

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