ual767ord
Posts: 142
Joined: Sat Mar 15, 2003 11:31 am

Is AA Certain Bankrupt

Tue Mar 18, 2003 7:01 am

Is AA propably going to file for chapter 11?. Having the 2 largest airlines bankrupt will the goverment help?
 
mirrodie
Posts: 6789
Joined: Wed Apr 19, 2000 3:33 am

RE: Is AA Certain Bankrupt

Tue Mar 18, 2003 7:30 am

Well, it ain't over til Ethyl Merman sings.

We'll wait and see. But there was an article yesterday about the FAA keeping tight reigns on the big three. If all big three are chapter 11, it would be the first time in history and the FAA does not want their quality to sink as a result.

It wants to make sure that whatever happens, they won;t cut the corners on issues like overall safety.

http://www.newsday.com/news/nationworld/nation/ny-lifaa0315.story
Forum moderator 2001-2010; He's a pedantic, pontificating, pretentious bastard, a belligerent old fart, a worthless st
 
exusair
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RE: Is AA Certain Bankrupt

Tue Mar 18, 2003 7:42 am

AA has been consulting with various bankruptcy lawyers as of late. It is not certain, but it appears to be on the horizon. If a bankruptcy filing should occur, it will likely be within the coming months.

As for a government bailout such as the post 9/11 setup, it appears as that will be highly unlikely. It is the contention of the government that many factors regarding airline finance were exacerbated by the events of that day, and the situation of overcapacity became more acute in the months following.

The attitude of government currently is that it has already done enough for the airlines, and it does not wish to tap into the "trust fund" in order to prolong an inevitability, that cash starved carriers with high costs cannot continue its failing business model. It seems that UAL will be the sacrificial lamb for the greater good of the industry.

Current lobbying efforts are for the goverment to pay for airport security functions. This function alone would release the shackels of a multibillion dollar burdon that the industry has been footing for over 1 year. There is also an effort to decrease the amount of tax levied to air travellers which could make up over 26% of a ticket price if a passenger transits an airlines hub twice in a roundtrip itinerary.

If the government would view airline security as a national security function, many of our nations carriers would be in better shape. It is up to the government to raise the funds necessary to fund the TSA. Airports with commercial air service should be the primary source of these revenues through Passenger Facilities Charges (PFC's), revenues garnered from parking facilities, and a small tax levied on goods and services obtained at local airports.

The government should release funds from the Aviation Trust Fund in order to fund security equipment and functions. This money sits in a bank and is earmarked exclusively to federal programs such as ATC renewal and facility construction.

Only 1 new airport has been built (DEN) since these moneys have been collected since the 1980's. There are no new airports in the planning stages and most faciltiy improvements are paid for by the air carriers themselves.
 
artsyman
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RE: Is AA Certain Bankrupt

Tue Mar 18, 2003 7:50 am

Airlines like Continental were doing fine before 9.11 however, and despite the falling yields, have repeatedly stated that the reason for their current losses is only to do with the extra security taxes placed on them since 9.11.

Continentals last financial report confirmed that if they were not lumbered with the security taxes, then they would have made a profit in the last quarters
 
LFutia
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RE: Is AA Certain Bankrupt

Tue Mar 18, 2003 9:21 am

This is a posible scenario but here goes. Say AA does file for Ch.11 and we already know that UA is in Ch.11 As you all know, AA and UA have hubs in ORD. If they both fall, who would take over? ORD would have a gaping hole if both were liquidated....

Leo/ORD
Leo/ORD -- Groetjes uit de VS! -- Heeft u laatst nog met KLM gevlogen?
 
J32driver
Posts: 385
Joined: Fri May 05, 2000 2:55 am

RE: Is AA Certain Bankrupt

Tue Mar 18, 2003 9:36 am

No politician can ever touch the Trust fund. They use it to balance the overall budget. The money is only there on paper. It really doesn't exist.
 
BeltwayBandit
Posts: 474
Joined: Tue Mar 11, 2003 4:25 am

RE: Is AA Certain Bankrupt

Tue Mar 18, 2003 10:56 am

The FAA worries more about an airline that has not yet filed bankruptcy. That's when financial concerns might make them make poor decisions on maintenance, etc.

Once bankrupt, there is somewhat of a honeymoon period when cashflow improves.
 
ConcordeBoy
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RE: Is AA Certain Bankrupt

Tue Mar 18, 2003 11:24 am

This is a posible scenario but here goes. Say AA does file for Ch.11 and we already know that UA is in Ch.11 As you all know, AA and UA have hubs in ORD. If they both fall, who would take over? ORD would have a gaping hole if both were liquidated....

How many times will this scenario be repeatedly asked?  Insane

Basically, common sense would tell you that if one O'Hare carrier dies, the other would most likely survive on the dead carrier's carcass. If conditions are such that both failed at the same time (unlikely), then no doubt other forces would have to come into play for the airline industry.
Faire du ciel le plus bel endroit de la terre c'est impossible sans Concorde!
 
shaun3000
Posts: 439
Joined: Thu Mar 14, 2002 4:10 pm

RE: Is AA Certain Bankrupt

Tue Mar 18, 2003 2:19 pm

A wonderful article on why airlines are failing: http://www.southwest.com/swatakeoff/post911.html

Written by none other than Herb Kelleher!
 
artsyman
Posts: 4516
Joined: Wed Feb 28, 2001 12:35 pm

RE: Is AA Certain Bankrupt

Tue Mar 18, 2003 2:31 pm

Gordon Bethune would say exactly the same thing as Herb.
 
Boeingfan
Posts: 369
Joined: Thu Aug 30, 2001 1:47 am

RE: Is AA Certain Bankrupt

Tue Mar 18, 2003 3:28 pm

AA is not certain for bankruptcy. Repeat AA is not certain to file for chapter 11 reorganization.

If UA goes down which could happen in days, or maximum a couple of weeks of war, AA will be the victor.

On the other debate, AA would have alot to gain in a (ch. 11) reorganization, and emerge one of the most powerful global airlines. It maybe best for AA to file Ch. 11, reduce cost, reorganize and then, emerge healthy. Attack and retake from the interim victor the UA market strong holds all while preserving revenue with higher prices.

Look for airfares to increase at least 33% by 2004 in the ORD area, this will save AA. Fasten your seat belts, and get your "sale tickets now" 'cause it is going to be a short bumpy ride.

2cents Bf
 
cloudy
Posts: 1613
Joined: Sat Apr 06, 2002 3:23 pm

RE: Is AA Certain Bankrupt

Tue Mar 18, 2003 3:34 pm

An even better presentation can be found in the "Plane Talk" section of the same site by Southwest CFO Laura Wright. She says that the new security taxes will eat up all that the airlines got in the post-9/11 cash bailout in less then a year. That is because, in this environment, it is nearly indisputable that this cost is being transfered to the airlines as customers. This is because they take it into account in deciding when and if to travel. Flying is perhaps the most overtaxed activity other than smoking, drinking alcohol and gambling. And the taxes on those activities were imposed in order to deliberatly discourage them.

Though the conclusions are sound. some of the logic has to be taken with a grain of salt. Laura said -

----
Q: Does a tax, fee, or charge of just a few dollars per passenger really matter to Southwest?
A: Yes. In the five calendar quarters since 9/11, Southwest's net profit per passenger was only $2.96. To put that in perspective, the federal sales tax on an average Southwest ticket is $6.25; federal "segment" and security fees add another $5 per segment flown; and 51 of our 59 airports have passenger facility charges of $3 - $4.50. So, government makes a lot more money off our Customers than we do!
----

The point that the fees matter is sound. Yet she is comparing Southwest's PROFIT off of a ticket with the government's REVENUE. They are not the same thing, so this is a falacious comparison. The government's "profit" off of all these fees would be what is left over after the cost of everything the taxes pay for is taken out. For example, take all the money that is generated by all taxes imposed to pay for security. Subtract the cost of the TSA from that. The result would be the government's "profit" from the security tax - this may very well be a small or even negative number.

Divide this "profit" from all ticket taxes by the number of tickets, and you would have a good idea of how much money the government "makes" from Southwest customers. This could be compared to Southwest's PROFIT. Or take the total ticket taxes collected by the government, and then compare that to Southwest's REVENUE. Either comparison is fair, and Southwest in fact uses the second method when it says that ticket taxes can be up to 30% of the purchase price of a ticket or even more.

But it is NOT fair to say that ".....government makes a lot more money off our Customers than we do!". At least, it is not fair to say this on the basis of ticket taxes alone.

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