AA747123
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AA accused of wasting investor money

Wed Mar 14, 2018 3:35 pm

https://www.nasdaq.com/article/american ... 933714/amp

I would not say this so fast. AA has not placed new orders for these 45 retiring 737s, existing orders will. Also, this could help keep capacity under control and yields in check. AA will likely eventually cancel the A350 order (should know more by end of summer), further helping with CAPEX, and overall capacity as I doubt that the A350 order will be replaced with anything.
 
anshabhi
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 3:40 pm

Atleast 1 airline in US which is trying to be Customer friendly. Why cant those investors just run away instead of complaining. Let AA management do whatever's best for them.
 
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Polot
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 3:48 pm

anshabhi wrote:
Atleast 1 airline in US which is trying to be Customer friendly. Why cant those investors just run away instead of complaining. Let AA management do whatever's best for them.

Many will disagree about the 737MAX and likely A321neos being “customer friendly.” Not the way AA is configuring them.
 
ilovelamp
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 3:57 pm

anshabhi wrote:
Atleast 1 airline in US which is trying to be Customer friendly. Why cant those investors just run away instead of complaining. Let AA management do whatever's best for them.


Doug Parker and Scott Kirby do not care about being customer friendly. Make no mistake they only want what’s best for the bottom line.
 
rajincajun01
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 4:00 pm

anshabhi wrote:
Atleast 1 airline in US which is trying to be Customer friendly.


I'm sure those who have flown American and then Alaska, Virgin America, and/or Southwest would find that comment hilarious.
 
ScottB
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 4:07 pm

anshabhi wrote:
Why cant those investors just run away instead of complaining. Let AA management do whatever's best for them.


Because AA management's job is literally to make money for investors. If they're doing a poor job of running the company to produce good returns for investors, they should be booted.
 
ckfred
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 4:14 pm

The comments about AA retiring 45 738s with 5 to 10 years of useful life left shows the writer's ignorance about commercial aviation. If he had done any research, he would know that the 45 aircraft in question have a couple of issues. First, the HUD system in those aircraft is an older system that isn't used in the newer 738s, NG and MAX. The newer system can't be retrofitted into the aircraft due for retirement, and, rightly or wrongly, AA would rather put Honeywell parts into a Honeywell system, rather than parts from a 3rd party vendor.

Second, I've read that the older aircraft also have a modification to the fuel system that is due. The cost of the modification, in the opinion of management, is too expensive for the service life left in the aircraft.

AA got raked over the coals for not ordering aircraft to replace the MD-80s, as the oldest frames came up on 30 years old, back in 2013.

As planes get older, they become less reliable. I would say since 2012 or 2013, every other MD-80 flight has been delayed due to a mechanical issue, including dead batteries and an APU that would not start.

My wife flew ORD-MCO last month on a 738 that is part of the group of 45 due for retirement. Guess what? Here flight was delayed 45 minutes, because of a leak in the #2 engine.

Yes, having a lot of debt is not good. But, having older planes that become maintenance hogs and regularly have delayed departures is also an isue.
 
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Polot
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 4:25 pm

ckfred wrote:
My wife flew ORD-MCO last month on a 738 that is part of the group of 45 due for retirement. Guess what? Here flight was delayed 45 minutes, because of a leak in the #2 engine.

Not really a great example, as engines get swapped around all the time. Just because the airframe is ~19 years old doesn’t mean the engines are that old too. That leaky engine could have been <5 years old for all we know.

ilovelamp wrote:
anshabhi wrote:
Atleast 1 airline in US which is trying to be Customer friendly. Why cant those investors just run away instead of complaining. Let AA management do whatever's best for them.


Doug Parker and Scott Kirby do not care about being customer friendly. Make no mistake they only want what’s best for the bottom line.

Scott Kirby left AA for UA about 18 months ago now.
 
ilovelamp
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 4:30 pm

Polot wrote:
ckfred wrote:
My wife flew ORD-MCO last month on a 738 that is part of the group of 45 due for retirement. Guess what? Here flight was delayed 45 minutes, because of a leak in the #2 engine.

Not really a great example, as engines get swapped around all the time. Just because the airframe is ~19 years old doesn’t mean the engines are that old too. That leaky engine could have been <5 years old for all we know.

ilovelamp wrote:
anshabhi wrote:
Atleast 1 airline in US which is trying to be Customer friendly. Why cant those investors just run away instead of complaining. Let AA management do whatever's best for them.


Doug Parker and Scott Kirby do not care about being customer friendly. Make no mistake they only want what’s best for the bottom line.

Scott Kirby left AA for UA about 18 months ago now.


Yep, thanks, brain fart. Point still remains about Parker. In fact, Kirby hasn’t changed his MO much since joining UA.
 
Austin787
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 4:34 pm

I think what the article is getting at is the costs of maintaining and refurbishing older planes is far less than the costs of buying brand new planes. Look at Delta - they fly many planes that are as old, or even older, than AA's planes. Yet Delta's old planes are more reliable and look more modern than those at USdbaAA. A simpler example is the costs of repairing an old car that's paid for vs the costs of buying a brand new car.

anshabhi wrote:
Atleast 1 airline in US which is trying to be Customer friendly. Why cant those investors just run away instead of complaining. Let AA management do whatever's best for them.

True. But USdbaAA isn't one of them. Delta, Southwest, and JetBlue have made big efforts to be customer friendly.
Last edited by Austin787 on Wed Mar 14, 2018 4:39 pm, edited 1 time in total.
 
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ikolkyo
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 4:37 pm

ckfred wrote:
The comments about AA retiring 45 738s with 5 to 10 years of useful life left shows the writer's ignorance about commercial aviation. If he had done any research, he would know that the 45 aircraft in question have a couple of issues. First, the HUD system in those aircraft is an older system that isn't used in the newer 738s, NG and MAX. The newer system can't be retrofitted into the aircraft due for retirement, and, rightly or wrongly, AA would rather put Honeywell parts into a Honeywell system, rather than parts from a 3rd party vendor.

Second, I've read that the older aircraft also have a modification to the fuel system that is due. The cost of the modification, in the opinion of management, is too expensive for the service life left in the aircraft.

AA got raked over the coals for not ordering aircraft to replace the MD-80s, as the oldest frames came up on 30 years old, back in 2013.

As planes get older, they become less reliable. I would say since 2012 or 2013, every other MD-80 flight has been delayed due to a mechanical issue, including dead batteries and an APU that would not start.

My wife flew ORD-MCO last month on a 738 that is part of the group of 45 due for retirement. Guess what? Here flight was delayed 45 minutes, because of a leak in the #2 engine.

Yes, having a lot of debt is not good. But, having older planes that become maintenance hogs and regularly have delayed departures is also an isue.


An engine issue has nothing to do with the airframe, most likely not even the same engines on the frame since it’s delivery.
 
UpNAWAy
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 4:39 pm

They are operating under the current fact that debt is historically cheap and new aircraft cost less to operate and are preferred by the general public. DL is operating on an almost opposite philosophy. Both might be right and neither is inherently wrong.
 
zakuivcustom
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 4:46 pm

I found the article funny myself anyway. You got one side that complain how US3 product is awful, running extremely old planes (Especially compare to East Asian carriers or ME3), delays due to those old planes, etc. Then now you got an article that complain about an airline wasting money on new planes?

And quite frankly, have they look at Ryanair and how they dump planes left and right quick? Last I check Ryanair is still making tons of money.
 
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AAlaxfan
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 4:52 pm

This article is a biased piece basically saying to buy DL stock vs. AA stock, giving CAPEX as one of the reasons. The last line of the article says all you need to know (emphasis is mine):
"Adam Levine-Weinberg owns shares of Delta Air Lines and Embraer."
Grumpy. Not a dwarf, not an attitude. It's a lifestyle.
 
WkndWanderer
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 5:24 pm

AAlaxfan wrote:
This article is a biased piece basically saying to buy DL stock vs. AA stock, giving CAPEX as one of the reasons. The last line of the article says all you need to know (emphasis is mine):
"Adam Levine-Weinberg owns shares of Delta Air Lines and Embraer."


I think the truth is somewhere in the middle. AA already ordered a huge amount of narrow bodies a few years ago under favorable terms and it probably makes sense to part with older 737's and A320's, but AA is undeniably highly leveraged, their debt-to-capital is the highest in the industry by far.
 
WkndWanderer
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 5:24 pm

AAlaxfan wrote:
This article is a biased piece basically saying to buy DL stock vs. AA stock, giving CAPEX as one of the reasons. The last line of the article says all you need to know (emphasis is mine):
"Adam Levine-Weinberg owns shares of Delta Air Lines and Embraer."


I think the truth is somewhere in the middle. AA already ordered a huge amount of narrow bodies a few years ago under favorable terms and it probably makes sense to part with older 737's and A320's, but AA is undeniably highly leveraged, their debt-to-capital is the highest in the industry by far.
 
WkndWanderer
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 5:24 pm

AAlaxfan wrote:
This article is a biased piece basically saying to buy DL stock vs. AA stock, giving CAPEX as one of the reasons. The last line of the article says all you need to know (emphasis is mine):
"Adam Levine-Weinberg owns shares of Delta Air Lines and Embraer."


I think the truth is somewhere in the middle. AA already ordered a huge amount of narrow bodies a few years ago under favorable terms and it probably makes sense to part with older 737's and A320's, but AA is undeniably highly leveraged, their debt-to-capital is the highest in the industry by far.
 
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Spacepope
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 6:27 pm

ckfred wrote:
The comments about AA retiring 45 738s with 5 to 10 years of useful life left shows the writer's ignorance about commercial aviation. If he had done any research, he would know that the 45 aircraft in question have a couple of issues. First, the HUD system in those aircraft is an older system that isn't used in the newer 738s, NG and MAX. The newer system can't be retrofitted into the aircraft due for retirement, and, rightly or wrongly, AA would rather put Honeywell parts into a Honeywell system, rather than parts from a 3rd party vendor.

Second, I've read that the older aircraft also have a modification to the fuel system that is due. The cost of the modification, in the opinion of management, is too expensive for the service life left in the aircraft.

AA got raked over the coals for not ordering aircraft to replace the MD-80s, as the oldest frames came up on 30 years old, back in 2013.

As planes get older, they become less reliable. I would say since 2012 or 2013, every other MD-80 flight has been delayed due to a mechanical issue, including dead batteries and an APU that would not start.

My wife flew ORD-MCO last month on a 738 that is part of the group of 45 due for retirement. Guess what? Here flight was delayed 45 minutes, because of a leak in the #2 engine.

Yes, having a lot of debt is not good. But, having older planes that become maintenance hogs and regularly have delayed departures is also an isue.

Plus the author doesn't seem to grasp that selling the 737s without investing in a heavy check now is probably more financially beneficial when the airframes have a value to a second operator rather than running them a few more years and then scrapping them.
The last of the famous international playboys
 
LMFNINJA
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 6:47 pm

WkndWanderer wrote:
AAlaxfan wrote:
This article is a biased piece basically saying to buy DL stock vs. AA stock, giving CAPEX as one of the reasons. The last line of the article says all you need to know (emphasis is mine):
"Adam Levine-Weinberg owns shares of Delta Air Lines and Embraer."


I think the truth is somewhere in the middle. AA already ordered a huge amount of narrow bodies a few years ago under favorable terms and it probably makes sense to part with older 737's and A320's, but AA is undeniably highly leveraged, their debt-to-capital is the highest in the industry by far.



Good point. Agree 100%.
 
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spinotter
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 7:05 pm

rajincajun01 wrote:
anshabhi wrote:
Atleast 1 airline in US which is trying to be Customer friendly.


I'm sure those who have flown American and then Alaska, Virgin America, and/or Southwest would find that comment hilarious.


Every airliner has a certain zeitgeist and default presentation to the customer. WN employees are paid more, so they smile a lot. B6 employees have dreams. DL employees cling to Atlanta. UA employees are from Newark and it shows. AF employees take to the runways. So there is a certain mindset operative upon each flight departure. You can always find the human being, but maybe not so easily, especially at current wage levels. Come on, why should they be any more loving or courteous than your normal 7-11 employee? They are hardly paid any more.
 
rajincajun01
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 7:42 pm

spinotter wrote:
Every airliner has a certain zeitgeist and default presentation to the customer. WN employees are paid more, so they smile a lot. B6 employees have dreams. DL employees cling to Atlanta. UA employees are from Newark and it shows. AF employees take to the runways. So there is a certain mindset operative upon each flight departure. You can always find the human being, but maybe not so easily, especially at current wage levels. Come on, why should they be any more loving or courteous than your normal 7-11 employee? They are hardly paid any more.


It’s not about pay. AA customer service agents top out at about $32/hr after 12 years of service. That also does not include bonuses, profit share, flight benefits, and travel benefits. Many AA agents got significant raises (30%+) when they became unionized after the US merger. Profit sharing is also a recent addition AA agents didn’t have until recently. If we were talking about Frontier, I may agree with you a bit.
 
ScottB
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 7:57 pm

UpNAWAy wrote:
They are operating under the current fact that debt is historically cheap and new aircraft cost less to operate and are preferred by the general public. DL is operating on an almost opposite philosophy. Both might be right and neither is inherently wrong.


I think Delta has demonstrated that passengers don't really care that much about the actual age of the plane as long as the service is reliable and the aircraft doesn't look & feel old on the inside. In recent years, DL has done a pretty good job of keeping up and refreshing aircraft interiors; the 30-year-old MD-88s really don't feel 30 years old on the inside. And if you've got a good maintenance operation and take advantage of the low capital costs of the older aircraft to keep around more spares, older aircraft can be part of a reliable operation as well.
 
freakyrat
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 8:38 pm

Polot wrote:
anshabhi wrote:
Atleast 1 airline in US which is trying to be Customer friendly. Why cant those investors just run away instead of complaining. Let AA management do whatever's best for them.

Many will disagree about the 737MAX and likely A321neos being “customer friendly.” Not the way AA is configuring them.


Rode on a WN 737MAX. the airplane was customer friendly.
 
jumbojet
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 9:48 pm

ckfred wrote:
The comments about AA retiring 45 738s with 5 to 10 years of useful life left shows the writer's ignorance about commercial aviation. If he had done any research, he would know that the 45 aircraft in question have a couple of issues. First, the HUD system in those aircraft is an older system that isn't used in the newer 738s, NG and MAX. The newer system can't be retrofitted into the aircraft due for retirement, and, rightly or wrongly, AA would rather put Honeywell parts into a Honeywell system, rather than parts from a 3rd party vendor.

Second, I've read that the older aircraft also have a modification to the fuel system that is due. The cost of the modification, in the opinion of management, is too expensive for the service life left in the aircraft.

AA got raked over the coals for not ordering aircraft to replace the MD-80s, as the oldest frames came up on 30 years old, back in 2013.

As planes get older, they become less reliable. I would say since 2012 or 2013, every other MD-80 flight has been delayed due to a mechanical issue, including dead batteries and an APU that would not start.

My wife flew ORD-MCO last month on a 738 that is part of the group of 45 due for retirement. Guess what? Here flight was delayed 45 minutes, because of a leak in the #2 engine.

Yes, having a lot of debt is not good. But, having older planes that become maintenance hogs and regularly have delayed departures is also an isue.


So I'll bite. What you wrote begs the question, what are other airlines doing that own similar 737's to the ones that AA is getting rid of? Looks like Delta has a bunch of 737-800's that were purchased new from 1998-ish to 2000-ish.
 
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DarkSnowyNight
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Re: AA accused of wasting investor money

Wed Mar 14, 2018 10:12 pm

Polot wrote:
Scott Kirby left AA for UA about 18 months ago now.



True. But unless you're trying to save a little time euthanizing your dog on the way to your favorite Fight Club, United isn't exactly great for customer service either.

ScottB wrote:
UpNAWAy wrote:
They are operating under the current fact that debt is historically cheap and new aircraft cost less to operate and are preferred by the general public. DL is operating on an almost opposite philosophy. Both might be right and neither is inherently wrong.


I think Delta has demonstrated that passengers don't really care that much about the actual age of the plane as long as the service is reliable and the aircraft doesn't look & feel old on the inside. In recent years, DL has done a pretty good job of keeping up and refreshing aircraft interiors; the 30-year-old MD-88s really don't feel 30 years old on the inside. And if you've got a good maintenance operation and take advantage of the low capital costs of the older aircraft to keep around more spares, older aircraft can be part of a reliable operation as well.


With the exception of the densification levels they've sunk to, yeah, I'd agree with this. DL do have what are the "freshest" looking interiors of any of the legacy carriers. And even things like seat pitch are equal to NK's, people still seem to like their perceptions. It's clearly worth it to keep the planes looking nice.
Much like a GE90, I'm a huge fan of Big Twins...
 
MSPNWA
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Re: AA accused of wasting investor money

Thu Mar 15, 2018 1:40 am

Adam Levine-Weinberg has a financial stake in DL and never shies away from trying to boost its stock price relative to its competition. How can anyone take him seriously?
 
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NeBaNi
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Re: AA accused of wasting investor money

Thu Mar 15, 2018 1:42 am

zakuivcustom wrote:
I found the article funny myself anyway. You got one side that complain how US3 product is awful, running extremely old planes (Especially compare to East Asian carriers or ME3), delays due to those old planes, etc. Then now you got an article that complain about an airline wasting money on new planes?

And quite frankly, have they look at Ryanair and how they dump planes left and right quick? Last I check Ryanair is still making tons of money.

Different stakeholders have different needs/ requirements. Systems architecting 101. Of course customers and bloggers would be more interested in improved products/ service and new planes. Those that have stocks of the airline will of course be more interested in low CapEx and not wasting money on new planes.
 
IPFreely
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Re: AA accused of wasting investor money

Thu Mar 15, 2018 1:59 am

ScottB wrote:
Because AA management's job is literally to make money for investors. If they're doing a poor job of running the company to produce good returns for investors, they should be booted.


This is 100% correct. But for some reason at least half of this board doesn't understand that airlines are for-profit corporations and that the owners hire managers to produce a return on their investment, just like the owners of any business. For some reason quite a few posters seem to think airlines are charities run for the benefit of employees or customers or unions or anything else. It's pretty entertaining, really.
 
LAXLHR
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Re: AA accused of wasting investor money

Thu Mar 15, 2018 2:36 am

Polot wrote:
ckfred wrote:
My wife flew ORD-MCO last month on a 738 that is part of the group of 45 due for retirement. Guess what? Here flight was delayed 45 minutes, because of a leak in the #2 engine.

Not really a great example, as engines get swapped around all the time. Just because the airframe is ~19 years old doesn’t mean the engines are that old too. That leaky engine could have been <5 years old for all we know.

ilovelamp wrote:
anshabhi wrote:
Atleast 1 airline in US which is trying to be Customer friendly. Why cant those investors just run away instead of complaining. Let AA management do whatever's best for them.


Doug Parker and Scott Kirby do not care about being customer friendly. Make no mistake they only want what’s best for the bottom line.

Scott Kirby left AA for UA about 18 months ago now.


Ummm, take a look at what's going down over at UA right now.
BA JM EA GK PA VS AA SN HP CO W7 WN NW DL QQ UA AC US LH LX OS JL QF QR PG MH CX U2 EK 9W UK TP VY VN PC LO OK OZ UL SQ LA

707 727 L10 732-NG 741 742 743 744 752 753 762 763 772 773 787 DC8 DC9 DC10 M80 M11 100 AB3 310 318 319 320 321 332 333 342 343 380
 
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dennypayne
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Re: AA accused of wasting investor money

Thu Mar 15, 2018 2:50 am

DarkSnowyNight wrote:

ScottB wrote:
I think Delta has demonstrated that passengers don't really care that much about the actual age of the plane as long as the service is reliable and the aircraft doesn't look & feel old on the inside. In recent years, DL has done a pretty good job of keeping up and refreshing aircraft interiors; the 30-year-old MD-88s really don't feel 30 years old on the inside. And if you've got a good maintenance operation and take advantage of the low capital costs of the older aircraft to keep around more spares, older aircraft can be part of a reliable operation as well.


With the exception of the densification levels they've sunk to, yeah, I'd agree with this. DL do have what are the "freshest" looking interiors of any of the legacy carriers. And even things like seat pitch are equal to NK's, people still seem to like their perceptions. It's clearly worth it to keep the planes looking nice.


DL has nothing that is equal to NK's 28" pitch, AA's A319's are close but DL hasn't "sunk" anywhere near NK. I just got stuck in one of the rows near the back of a DL 739 and was dreading it a little for ATL-SEA (I'm 6'4") and it wasn't that bad. The MD-80's and 717's are very comfortable, especially on the 2 seat side.

As a former AA Platinum, I've seen much more densification on AA (fortunately I could still get MCE most of the time).

Back to topic, I think the writer of the original article clearly doesn't understand the value of getting out from under these birds that don't have commonality with the newer ones while they still have good resale value, as explored in this thread: viewtopic.php?f=3&t=1388559
My hovercraft is full of eels.
 
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Super80Fan
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Re: AA accused of wasting investor money

Thu Mar 15, 2018 2:50 am

DUI Dougie is a waste of money, dump him. AA is not customer friendly. Delta, JetBlue, Southwest, Alaska, yes, American & United NO.
RIP McDonnell Douglas
 
MaksFly
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Re: AA accused of wasting investor money

Thu Mar 15, 2018 3:18 am

dennypayne wrote:
DarkSnowyNight wrote:

ScottB wrote:
I think Delta has demonstrated that passengers don't really care that much about the actual age of the plane as long as the service is reliable and the aircraft doesn't look & feel old on the inside. In recent years, DL has done a pretty good job of keeping up and refreshing aircraft interiors; the 30-year-old MD-88s really don't feel 30 years old on the inside. And if you've got a good maintenance operation and take advantage of the low capital costs of the older aircraft to keep around more spares, older aircraft can be part of a reliable operation as well.


With the exception of the densification levels they've sunk to, yeah, I'd agree with this. DL do have what are the "freshest" looking interiors of any of the legacy carriers. And even things like seat pitch are equal to NK's, people still seem to like their perceptions. It's clearly worth it to keep the planes looking nice.


DL has nothing that is equal to NK's 28" pitch, AA's A319's are close but DL hasn't "sunk" anywhere near NK. I just got stuck in one of the rows near the back of a DL 739 and was dreading it a little for ATL-SEA (I'm 6'4") and it wasn't that bad. The MD-80's and 717's are very comfortable, especially on the 2 seat side.

As a former AA Platinum, I've seen much more densification on AA (fortunately I could still get MCE most of the time).

Back to topic, I think the writer of the original article clearly doesn't understand the value of getting out from under these birds that don't have commonality with the newer ones while they still have good resale value, as explored in this thread: viewtopic.php?f=3&t=1388559


So I am a Delta elite and I fly on Spirit when it is dirt cheap so travel in both... although usually up front with Delta...

If I am sitting in the back, I would rather be in the back of a Spirit flight where I know someone is not going to recline their seat and squash my laptop or ipad rather than be squeezed in by a reclining seat in front of me on a Delta flight. My knees are not going to care about an extra inch when there is a seat back in front of my face.

If you want best of both worlds, fly Spirit in the Big Front Seat or their exit rows.

But this is also why, if I could, I would travel in the single row of an ERJ 135/145 any day of the week, especially exit row in the single aisle.
And the older seats, oh my, much more comfortable than the new hard as a rock slimlines.
 
jumbojet
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Re: AA accused of wasting investor money

Thu Mar 15, 2018 3:36 am

MaksFly wrote:
dennypayne wrote:
DarkSnowyNight wrote:



With the exception of the densification levels they've sunk to, yeah, I'd agree with this. DL do have what are the "freshest" looking interiors of any of the legacy carriers. And even things like seat pitch are equal to NK's, people still seem to like their perceptions. It's clearly worth it to keep the planes looking nice.


DL has nothing that is equal to NK's 28" pitch, AA's A319's are close but DL hasn't "sunk" anywhere near NK. I just got stuck in one of the rows near the back of a DL 739 and was dreading it a little for ATL-SEA (I'm 6'4") and it wasn't that bad. The MD-80's and 717's are very comfortable, especially on the 2 seat side.

As a former AA Platinum, I've seen much more densification on AA (fortunately I could still get MCE most of the time).

Back to topic, I think the writer of the original article clearly doesn't understand the value of getting out from under these birds that don't have commonality with the newer ones while they still have good resale value, as explored in this thread: viewtopic.php?f=3&t=1388559


So I am a Delta elite and I fly on Spirit when it is dirt cheap so travel in both... although usually up front with Delta...

If I am sitting in the back, I would rather be in the back of a Spirit flight where I know someone is not going to recline their seat and squash my laptop or ipad rather than be squeezed in by a reclining seat in front of me on a Delta flight. My knees are not going to care about an extra inch when there is a seat back in front of my face.

If you want best of both worlds, fly Spirit in the Big Front Seat or their exit rows.

But this is also why, if I could, I would travel in the single row of an ERJ 135/145 any day of the week, especially exit row in the single aisle.
And the older seats, oh my, much more comfortable than the new hard as a rock slimlines.


You are so far off topic, its not even funny.

I posed a question above.... Someone mentioned that the reason AA is getting rid of their older 738's is because of older technology in the flightdeck that seems to continually breakdown thus causing AA a ton of money in MX. I replied wanting to know what other airlines are doing with their 20 year old 737-800's. Are those airlines also retiring them and buying new or what? Delta seems to own these 18 year old 737-800's and as far as I can tell, DL is not buying new aircraft to replace them. In fact, if anything,, Delta seems to be refurbishing them.. So what gives? It would seem that AA is indeed throwing away money and increasing their debt to levels never seen before in the industry.

AA debt is approaching 25 billion. DL debt is declining to 7 billion. One airline has the right business model, the other doesnt. One of these airlines is well prepared for the next downturn in air travel, the other one isn't......
 
RollerRB211
Posts: 21
Joined: Fri Aug 12, 2016 10:39 pm

Re: AA accused of wasting investor money

Thu Mar 15, 2018 4:00 am

You all fell for a Motley Fool article.
 
MaksFly
Posts: 270
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Re: AA accused of wasting investor money

Sat Mar 17, 2018 5:00 am

jumbojet wrote:
MaksFly wrote:
dennypayne wrote:

DL has nothing that is equal to NK's 28" pitch, AA's A319's are close but DL hasn't "sunk" anywhere near NK. I just got stuck in one of the rows near the back of a DL 739 and was dreading it a little for ATL-SEA (I'm 6'4") and it wasn't that bad. The MD-80's and 717's are very comfortable, especially on the 2 seat side.

As a former AA Platinum, I've seen much more densification on AA (fortunately I could still get MCE most of the time).

Back to topic, I think the writer of the original article clearly doesn't understand the value of getting out from under these birds that don't have commonality with the newer ones while they still have good resale value, as explored in this thread: viewtopic.php?f=3&t=1388559


So I am a Delta elite and I fly on Spirit when it is dirt cheap so travel in both... although usually up front with Delta...

If I am sitting in the back, I would rather be in the back of a Spirit flight where I know someone is not going to recline their seat and squash my laptop or ipad rather than be squeezed in by a reclining seat in front of me on a Delta flight. My knees are not going to care about an extra inch when there is a seat back in front of my face.

If you want best of both worlds, fly Spirit in the Big Front Seat or their exit rows.

But this is also why, if I could, I would travel in the single row of an ERJ 135/145 any day of the week, especially exit row in the single aisle.
And the older seats, oh my, much more comfortable than the new hard as a rock slimlines.


You are so far off topic, its not even funny.

I posed a question above.... Someone mentioned that the reason AA is getting rid of their older 738's is because of older technology in the flightdeck that seems to continually breakdown thus causing AA a ton of money in MX. I replied wanting to know what other airlines are doing with their 20 year old 737-800's. Are those airlines also retiring them and buying new or what? Delta seems to own these 18 year old 737-800's and as far as I can tell, DL is not buying new aircraft to replace them. In fact, if anything,, Delta seems to be refurbishing them.. So what gives? It would seem that AA is indeed throwing away money and increasing their debt to levels never seen before in the industry.

AA debt is approaching 25 billion. DL debt is declining to 7 billion. One airline has the right business model, the other doesnt. One of these airlines is well prepared for the next downturn in air travel, the other one isn't......


Off topic? Get over it. This is a forum and things go in such direction.

But plenty of others have already answered your question.

If you want my own answer as a financial professional, it is QUITE simple and clear.

There are plenty of fiscally prudent companies who would rather be in a more sound position and are averse to using too much leverage. Spirit and Delta are in that field. Spirit bought all of their planes and last I checked did not carry debt, Delta instead buys used planes which reduces capital outlay and maximizes their return on assets.

Other companies, such as AA are either trying to invest in their growth or see a stable outlook for the future and thus are fine leveraging up their balance sheet. As long as they are able to maintain a low cost of capital and are able to use that debt and have a higher Return on Investment on those assets, they are fine.

A leveraged company will grow faster but they are also going to be much more susceptible to the house of cards falling down.

My guess is, AA believes their cost of capital is low enough that they want to risk it.

Of course, this is a cyclical industry as well and before they know it, that debt is going to be calling.

There is no right or wrong strategy there, it is merely what they are comfortable with.

Some people are fine buying a 10 year old car in good condition and driving it until the wheels fall off. Yes, they may spend more on gas and some repairs, but that asset is fully paid for.

Other people don't want to worry about repair bills OR drive so much that they spend more on gas than they would on the monthly payment on the car. Even more, they may drive so much that the new car's gas savings when prices go up more than pays for the monthly loan payment.

Same with their strategies... it is all about what management thinks is best for their company and what their shareholders are willing to tolerate.

As an investor, if you think the next 5 years will be good for airlines with low interest rates, you buy AA. If you think there will be slowdowns, you buy the cleanest balance sheets you can find. This would be an airline that owns their planes outright with no debt or a company that leases and has manageable lease payments which are covered. You would not want to own a company who owns their planes and has a crap ton of debt on them.
 
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DL747400
Posts: 494
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Re: AA accused of wasting investor money

Sat Mar 17, 2018 2:18 pm

RollerRB211 wrote:
You all fell for a Motley Fool article.


I was thinking the same thing! It's like a bad cross between Motley Fool, Seeking Alpha and Ted Reed over at TheStreet.com. It is sad how anything passes as "news" these days and the most people don't question anything they read or think for themselves.

Those 738s do have life left in them. If AA decides they don't want to invest the money in the HMVs required to continue operating those jets, then that this their decision. The Management team will ultimately have to explain the decision to their investors.
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klm617
Posts: 3409
Joined: Sat Jul 04, 2015 8:57 pm

Re: AA accused of wasting investor money

Sat Mar 17, 2018 2:46 pm

ScottB wrote:
anshabhi wrote:
Why cant those investors just run away instead of complaining. Let AA management do whatever's best for them.


Because AA management's job is literally to make money for investors. If they're doing a poor job of running the company to produce good returns for investors, they should be booted.



LOL with no customers there's no profit so the customer experience should be first and foremost. Or is it that there is so little competition that these airlines now have the balls to implement whatever they want knowing for the most part that the customers have no real choice in the market place anymore when it comes to flying. An airline sells it's product in the service sector so hence service should be number one in their mind.
the truth does matter, guys. too bad it's often quite subjective. the truth is beyond the mere facts and figures. it's beyond good and bad, right and wrong...
 
bob75013
Posts: 505
Joined: Tue Jun 23, 2015 5:05 pm

Re: AA accused of wasting investor money

Sat Mar 17, 2018 3:20 pm

klm617 wrote:
ScottB wrote:
anshabhi wrote:
Why cant those investors just run away instead of complaining. Let AA management do whatever's best for them.


Because AA management's job is literally to make money for investors. If they're doing a poor job of running the company to produce good returns for investors, they should be booted.



LOL with no customers there's no profit so the customer experience should be first and foremost. Or is it that there is so little competition that these airlines now have the balls to implement whatever they want knowing for the most part that the customers have no real choice in the market place anymore when it comes to flying. An airline sells it's product in the service sector so hence service should be number one in their mind.


IMO customer experience imperatives
1) Reliable (safe) service
2) Competitive ticket price
3 Something close to on time arrival
4 Good enough seat pitch / in flight amenities

Within those imperatives, it makes no difference what airlines offer as long as the airlines are competitive with one another. Good enough is enough..
 
MIflyer12
Posts: 4222
Joined: Mon Feb 18, 2013 11:58 pm

Re: AA accused of wasting investor money

Sat Mar 17, 2018 3:35 pm

MaksFly wrote:
As an investor, if you think the next 5 years will be good for airlines with low interest rates, you buy AA. If you think there will be slowdowns, you buy the cleanest balance sheets you can find. This would be an airline that owns their planes outright with no debt or a company that leases and has manageable lease payments which are covered. You would not want to own a company who owns their planes and has a crap ton of debt on them.


This isn't an interest rate play when discussing AA vs. Delta. The key factor is assumption of fuel costs medium-term. AA - even with more leverage - spends way, way more on fuel than it does interest and the interest component of operating and capital leases. IMHO, if we saw the fuel cost assumptions - probably in years 4-8 - we would understand why they buy what they do. Who is going to be more right? I can't say. A fuel efficient aircraft is, to the extent of its greater fuel efficiency vs. older equipment, its own fuel hedge. In a very simplified model, you could say a carrier that is all Max 8 has edged 13% of its fuel vs. a carrier that is all 737-800 -- and it did it without brokerage fees.

Northwest started refurbing fuel-guzzling DC-9s in the early 90s and looked brilliant as fuel costs continued to decline through the decade. They didn't look so smart when fuel prices rose almost uninterrupted 2002-late 2005, reaching about 7x the December '98 low. In 9/2005, both DL and NW filed for Ch 11.
 
superjeff
Posts: 1119
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Re: AA accused of wasting investor money

Sat Mar 17, 2018 10:17 pm

MIflyer12 wrote:
MaksFly wrote:


Northwest started refurbing fuel-guzzling DC-9s in the early 90s and looked brilliant as fuel costs continued to decline through the decade. They didn't look so smart when fuel prices rose almost uninterrupted 2002-late 2005, reaching about 7x the December '98 low. In 9/2005, both DL and NW filed for Ch 11.


Fuel costs were a minor factor in the filing for Chapter 11 by Delta and Northwest when they did so. A major change in U.S. bankruptcy laws took effect in October of that year, and if they had waited until after the change it would not have been as beneficial.
 
JAAlbert
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Joined: Tue Jan 31, 2006 12:43 pm

Re: AA accused of wasting investor money

Sat Mar 17, 2018 10:23 pm

Is this even news? Upon exiting bankruptcy, AA announced its massive purchase of Airbus and Boeing aircraft totaling $40bln, financed almost entirely by new debt. I recall several commentators at the time questioning the wisdom of acquiring so much debt so quickly.

And, didn't an AA official just announce that AA will not be purchasing new aircraft, acquiring new financing, or flying to non-hub points from this point forward? That announcement at least sounds like AA is focusing on its finances.
 
coolian2
Posts: 2426
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Re: AA accused of wasting investor money

Sat Mar 17, 2018 10:42 pm

AA have been in the most desperate need for new planes. I mean the MDs were actually burning money?
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ilovelamp
Posts: 185
Joined: Tue Dec 05, 2017 12:45 am

Re: AA accused of wasting investor money

Sat Mar 17, 2018 10:42 pm

ual763 wrote:
I’m beginning to think that Continental had the right idea by not choosing to install the HUD on their 737s when they bought them, which now obviously transferred over to UAL. I know Delta’s newer 737s have them, but do their older 737-800s have the HUD?


Every Delta 737 has a HUD.
 
ual763
Posts: 692
Joined: Sun May 14, 2017 11:46 am

Re: AA accused of wasting investor money

Sat Mar 17, 2018 10:43 pm

I’m beginning to think that Continental had the right idea by not choosing to install the HUD on their 737s when they bought them, which now obviously transferred over to UAL. I know Delta’s newer 737s have them, but do their older 737-800s have the HUD?
From flying to the NOTAM office
 
MIflyer12
Posts: 4222
Joined: Mon Feb 18, 2013 11:58 pm

Re: AA accused of wasting investor money

Sun Mar 18, 2018 12:29 am

superjeff wrote:
MIflyer12 wrote:
MaksFly wrote:


Northwest started refurbing fuel-guzzling DC-9s in the early 90s and looked brilliant as fuel costs continued to decline through the decade. They didn't look so smart when fuel prices rose almost uninterrupted 2002-late 2005, reaching about 7x the December '98 low. In 9/2005, both DL and NW filed for Ch 11.


Fuel costs were a minor factor in the filing for Chapter 11 by Delta and Northwest when they did so. A major change in U.S. bankruptcy laws took effect in October of that year, and if they had waited until after the change it would not have been as beneficial.


Delta's fuel costs went from $2,370 million in 2003, to $2,924 million in 2004, to $4,261 million in 2005. You keep telling yourself Delta's Ch 11 filing was just a matter of convenient timing. I'll point out that U.S. carriers continued to use Ch 11 after 2005, too.
 
superjeff
Posts: 1119
Joined: Fri Feb 05, 2010 2:14 am

Re: AA accused of wasting investor money

Sun Mar 18, 2018 1:17 am

MIflyer12 wrote:
superjeff wrote:
MIflyer12 wrote:


Fuel costs were a minor factor in the filing for Chapter 11 by Delta and Northwest when they did so. A major change in U.S. bankruptcy laws took effect in October of that year, and if they had waited until after the change it would not have been as beneficial.



u keep telling yourself Delta's Ch 11 filing was just a matter of convenient timing. I'll point out that U.S. carriers continued to use Ch 11 after 2005, too.



I don't disagree with you, but the change in the Bankruptcy laws was a major consideration in the timing. Delta and Northwest might have postponed filing if they didn't think that the new law made it less advantageous.
 
khinstorff
Posts: 53
Joined: Wed Apr 12, 2017 5:43 pm

Re: AA accused of wasting investor money

Sun Mar 18, 2018 3:38 am

DL747400 wrote:
Those 738s do have life left in them. If AA decides they don't want to invest the money in the HMVs required to continue operating those jets, then that this their decision. The Management team will ultimately have to explain the decision to their investors.


I think people outside of the industry are ignoring how many airlines are looking for used 737’s. Clearly AA doesn’t want to assume the MX costs, and they can sell those frames at an extremely favorable rate. I’d argue this is one of the best debt-servicing decisions their management team could make!
 
wjcandee
Posts: 7109
Joined: Mon Jun 05, 2000 12:50 am

Re: AA accused of wasting investor money

Sun Mar 18, 2018 4:32 am

I like it when dufuses on The Motley Fool make statements like American is "spending more money on new planes than is necessary".

Just freaking idiotic. Who the heck is this guy to say what is "necessary"?

Here's a clue. He's nobody.

And citing the 45 738s with the old HUD system is just one example of how what looks good to a know-nothing big-picture beancounter can make no sense to the folks actually down in the weeds making the freaking money.
 
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Spacepope
Posts: 3934
Joined: Tue Dec 28, 1999 11:10 am

Re: AA accused of wasting investor money

Sun Mar 18, 2018 5:29 am

JAAlbert wrote:
Is this even news? Upon exiting bankruptcy, AA announced its massive purchase of Airbus and Boeing aircraft totaling $40bln, financed almost entirely by new debt. I recall several commentators at the time questioning the wisdom of acquiring so much debt so quickly.

And, didn't an AA official just announce that AA will not be purchasing new aircraft, acquiring new financing, or flying to non-hub points from this point forward? That announcement at least sounds like AA is focusing on its finances.

He announced they would not be buying new aircraft for expansion. Fleet renewal is a different issue.
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