Guest

AA Bankrupt In 2003;UA Bye-bye If War Lasts Long

Tue Feb 04, 2003 1:11 pm

The World's largest airline, American Airlines and it's parent AMR Corp. is currntly burning $5 million/day with little or no relief.

Industry Experts are now very nervous that it could ended up like it's rival UAL and Us Airways: entering bankruptcy court.

Unlike UAL, AMR's financial problem is very simple: Money takes from pax downs sharply, and the company unable to cut expenses fast enough to keep up.

...For the moment, the company's saving grace is the $2 billion in unrestricted cash it has on hand. But even chief executive Don Carty has repeatedly said that American, which lost a record $3.5 billion in 2002, is operating at a level that is "unsustainable."

Without combined savings of about $2 billion, or 25 percent a year, from its various labor groups, AMR "could be in bankruptcy by next winter, or even sooner," Neidl said...

AMR has been set up various of meetings with it's staff about the crisis. AMR's employee do not believe the airline has done much as it could without their help.

For instance, labor leaders remain unconvinced that the company followed through with a promise to shrink the size of management by 22 percent.

Another cruicial problem is whether employees agrees 3% salary raise this year.

There are only 2 "hopeful" scenario for AMR: either economy rebounds in 2003, or UAL collapses.

Besides the labour problem, War on Iraq is another focus. High fuel prices plus air travel declines could force UAL to collapse and sell its assets.

3rd problem is the low-cost carriers.

For full article (not in my own words):
http://seattlepi.nwsource.com/business/apbiz_story.asp?category=1310&slug=American%20Airlines%20Bankruptcy
 
HlywdCatft
Posts: 5232
Joined: Mon Jan 29, 2001 6:21 am

RE: AA Bankrupt In 2003;UA Bye-bye If War Lasts Long

Tue Feb 04, 2003 1:13 pm

So in other words there is a battle in Chicago. The AA employees are hoping UA goes belly up so they can keep their jobs.
 
Trvlr
Posts: 4251
Joined: Thu Feb 17, 2000 9:58 am

RE: AA Bankrupt In 2003;UA Bye-bye If War Lasts Long

Tue Feb 04, 2003 1:14 pm

Anyone see re-regulation on the horizon?

Aaron G.
 
LH423
Posts: 5868
Joined: Sun Jul 11, 1999 6:27 am

RE: AA Bankrupt In 2003;UA Bye-bye If War Lasts Long

Tue Feb 04, 2003 4:38 pm

Nah! There was no regulation in the early-90s when PanAm and Eastern went belly up, and several airlines entered Chapter 11. There won't be one now, especially under a laisser-faire, Republican government. This is just the natural cycle for the airline industry. Every so often, there has to be a shakedown for the survival of the industry. It's economic Darwinism at its finest.

LH423
« On ne voit bien qu'avec le cœur. L'essentiel est invisible pour les yeux » Antoine de Saint-Exupéry
 
cch362
Posts: 135
Joined: Sun Apr 22, 2001 1:28 am

RE: AA Bankrupt In 2003;UA Bye-bye If War Lasts Long

Tue Feb 04, 2003 4:50 pm

I think the writing was on the wall for AMR when it lost $1.3 BILLION in the third quarter of 2002, generally the most profitable three months for airlines. Everyone was so focused on the United bankruptcy last autumn that American kind of slipped under the radar.

By the way, re-regulation would be a bAAd idea! Why regulate the industry to keep the weak players flying, whether they are the #1 and #2 airlines or an upstart. Let those airlines that cannot contain their costs fade away, and allow the more efficient ones to fill the void. The airline industry has proven to be flexible to endure the short-term pain of any closure no matter how big.

The American traveling public will be better off to let things take care of themselves.
 
AA717driver
Posts: 1502
Joined: Tue Feb 12, 2002 8:27 am

RE: AA Bankrupt In 2003;UA Bye-bye If War Lasts Long

Tue Feb 04, 2003 4:51 pm

The senior management and "consultants" will walk away from the smoking wreckage with tens of millions of dollars saying "tsk, tsk, if only the employees had made more of an effort to make this work".

I'm busy telling my kids to become lawyers--they win no matter what.TC
FL450, M.85
 
danialanwar
Posts: 420
Joined: Fri Mar 16, 2001 6:13 pm

RE: AA Bankrupt In 2003;UA Bye-bye If War Lasts Long

Tue Feb 04, 2003 8:22 pm

Can anybody tell me why these airlines are unable to shrink their network. Axe very unprofitable routes (roughly said where parking an a/c in the desert incurs less losses than operating it) and/or cut frequencies without going chapter 11. I mean if you produce above demand and sell at or below cost, then losing milions of dollars comes naturally, doesnt it?
Best Business Class: Royal Brunei. Best Economy: Singapore Airlines. First: please send money first!
 
Trvlr
Posts: 4251
Joined: Thu Feb 17, 2000 9:58 am

RE: AA Bankrupt In 2003;UA Bye-bye If War Lasts Long

Wed Feb 05, 2003 12:09 am

LHR423: Pardon me for going out on a limb here, but I believe PanAm and Eastern were nowhere near as big when they went bankrupt (and subsequently bust) as American and United are now. Therefore, I think there would be a much bigger impact on the nation's air transportation system if things go from bad to worse.

However, I don't have any figures to back me up, so I may be wrong!

Aaron G.
 
Greg
Posts: 5539
Joined: Sat May 28, 2005 1:11 am

RE: AA Bankrupt In 2003;UA Bye-bye If War Lasts Long

Wed Feb 05, 2003 12:57 am

AA717driver....that's what my parents told me.
They were right.
No matter condition a company is in....they will always need representation.

(however, I don't think you meant it in a 'good' way...).
 
cch362
Posts: 135
Joined: Sun Apr 22, 2001 1:28 am

RE: AA Bankrupt In 2003;UA Bye-bye If War Lasts Long

Wed Feb 05, 2003 4:12 am

Danialanwar,

Airlines cannot just shrink on demand because they have contractual agreements with various suppliers, including labor (i.e. they cannot dismiss anyone at will). That is why these companies must go down the bankruptcy route if they want to make significant changes. The court has the role in facilitating the renegotiation of contracts and agreements that ultimately alters the way company does business.
 
AA717driver
Posts: 1502
Joined: Tue Feb 12, 2002 8:27 am

RE: AA Bankrupt In 2003;UA Bye-bye If War Lasts Long

Wed Feb 05, 2003 4:38 am

Greg--It's not like I'm telling my kids to join the Mafia Big grin. I'm trying to talk my wife into going to law school right now--she's the only one who has the GPA to get in.TC
FL450, M.85
 
PSU.DTW.SCE
Posts: 6104
Joined: Mon Jan 28, 2002 11:45 am

RE: AA Bankrupt In 2003;UA Bye-bye If War Lasts Long

Wed Feb 05, 2003 7:27 am

How many more of these articles are we going to see, its as if some now-it-all journalist spits another one of these out every day without any new information.

Danialanwar,

Cutting routes, or known as "shrink to profitability" isn't as easy as it sounds. Its especially more difficult with a network carrier as cutting feed from a hub reduced connecting traffic onto other flights. The airline industry requires enormous amounts of fixed costs. Many aircraft are leased, and these leases simply can't be terminated, so regardless if they are parked or not, lease payments still must be made. Gate space must still be leased, and supplier contracts honored. Sometimes it makes more sense to keep a money-losing routes as cuts would make loses even worse. The biggest costs in the airline industry...1)Labor 2) Fuel Can't do a whole lot about the price of fuel.
 
TWFirst
Posts: 5752
Joined: Wed Apr 19, 2000 5:30 am

RE: PSU.DTW.SCE

Wed Feb 05, 2003 7:34 am

Well, here's another story on the topic that appeared today:

http://abcnews.go.com/wire/Business/ap20030204_1679.html
An unexamined life isn't worth living.
 
AA717driver
Posts: 1502
Joined: Tue Feb 12, 2002 8:27 am

RE: AA Bankrupt In 2003;UA Bye-bye If War Lasts Long

Wed Feb 05, 2003 10:48 am

And when they emerge, they will have shed debt, excess employees(me) and will take the industry by storm!TC

P.S.--Sorry, I couldn't resist Big grin
FL450, M.85
 
speedport
Posts: 269
Joined: Thu Sep 27, 2001 12:08 pm

RE: AA Bankrupt In 2003;UA Bye-bye If War Lasts Long

Wed Feb 05, 2003 1:17 pm

When people say UAL will be the first casualty of the pending war, I think what they mean is they want UAL to become a casualty.

For we know that the whole airline industry groaneth and travaileth in pain together until now. And not only they, but ourselves also, which hold the answer to overcapacity, even we ourselves groan within ourselves, waiting for the final outcome. For the entire industry wishes to be saved by this hope: but hope that is seen is not hope: for what the industry seeth, why does it yet hope for? But if we hope for that we see not, then do we with patience wait for it.

Just ask those over at AMR.

 
Boeingfan
Posts: 369
Joined: Thu Aug 30, 2001 1:47 am

RE: AA Bankrupt In 2003;UA Bye-bye If War Lasts Long

Wed Feb 05, 2003 3:30 pm

Not to panic. It will work out.

AA will get the cost concessions from labor, but not in the amount that has been published (USD1.8Bil./year.) Improved productivity from all work groups by 31MAR03. Reduced capacity, out sourcing, AAdvantage loyalty program and some fuel hedging will all keep AA flying for the next century or so. They do have cash avail. (USD2Bil.) Their staff want to keep a paycheck too.

If war breaks out, look at another gov't bailout for the USA airlines in the form of subsidies for airport access, fuel costs and security.

When/if UA goes to Chptr. 7 (liquadation,) then the industry will pick up the slack, and AA stands to gain the most UA market share with its hub in ORD. AA will hire alot of former UA personel. Airfares will become more rational (higher) with fewer seats chasing fewer discounts.

AA eventually will really expand in 2005, and the low cost carriers will just be a small blip on the radar and distant threat. Next AA hub, DEN. The industry will come out of this much stronger, with fewer USA carriers, four to five majors, and very profitable.

Subjective value judgement only. Not to be taken as fact or forecast of industry market performance.

Boeingfan
 
Guest

RE: AA Bankrupt In 2003;UA Bye-bye If War Lasts Long

Wed Feb 05, 2003 4:57 pm

If UA emerges from bankruptcy restrucutred, AA, DL, CO, NW will all have to file to lower their costs and compete.

Theres about a 60% chance UA will liquidate anyway. US' survival rate is higher.

TNNH
 
ual777contrail
Posts: 2914
Joined: Sun Feb 17, 2002 11:33 am

RE: AA Bankrupt In 2003;UA Bye-bye If War Lasts Long

Wed Feb 05, 2003 5:22 pm

boeingfan,
you need to lay off the chronic, there is no way AA would or could ever take most or all of Ua's Assets. Not only doesn't AA have the money to buy all, or most of our assets, but in my opinion the government would NEVER let AA be that big. If AA ever got all or most of UA'S stuff then WN,DL,CO,HP and all the others wouldn't stand a chance.

another thing is AA has a long and hard road to go down right now, they need money from labor. There is a mirror pattern that you folks at AA and the rest of the country are seeing, and that is exactly what went on at UA. We had the cash for a little while and our management team wasted all the time and energy, stumbling over dollars to pick up nickels and dimes. If there is war with Iraq, or I should really say "when" it will be quick and the government will in fact help out the majors. UA Will be back, and maybe not as strong as before. But remember this post, AA is going to file for chap. 11 by June. But hey I am also responding to a pro-AA post, and well I am a fan of UA so what can I expect? Not much.

ual 777 contrail
 
cch362
Posts: 135
Joined: Sun Apr 22, 2001 1:28 am

RE: AA Bankrupt In 2003;UA Bye-bye If War Lasts Long

Wed Feb 05, 2003 6:45 pm

I just don't think that a UA collapse could save AA. American's problem is not market reach, but costs. It is still having problems digesting the TWA purchase, and it is probably correct to say that American needs some serious route reductions of its own, not to say labor concessions.

If American somehow gets a hold of United's coveted Pacific routes, or all of Chicago, those will not make it profitable overnight. It will be just another bloated airline taking over, like a hippo passing the baton to a walrus in a race against dolphins.