LAXintl
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AA Exec Gets Grilling From Analyst

Tue Sep 13, 2011 7:29 pm

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
 
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IrishAyes
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RE: AA Exec Gets Grilling From Analyst

Tue Sep 13, 2011 7:58 pm

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.
confidence is silent. insecurities are loud.
 
commavia
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RE: AA Exec Gets Grilling From Analyst

Tue Sep 13, 2011 8:37 pm

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.
 
panamair
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RE: AA Exec Gets Grilling From Analyst

Tue Sep 13, 2011 9:03 pm

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?
 
jacobin777
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RE: AA Exec Gets Grilling From Analyst

Tue Sep 13, 2011 9:08 pm

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!"
 
panamair
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RE: AA Exec Gets Grilling From Analyst

Tue Sep 13, 2011 9:16 pm

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.....
 
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IrishAyes
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RE: AA Exec Gets Grilling From Analyst

Tue Sep 13, 2011 9:25 pm

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...
confidence is silent. insecurities are loud.
 
LAXtoATL
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RE: AA Exec Gets Grilling From Analyst

Tue Sep 13, 2011 9:45 pm

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.
 
goldenstate
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RE: AA Exec Gets Grilling From Analyst

Tue Sep 13, 2011 10:13 pm

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.
 
rising
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RE: AA Exec Gets Grilling From Analyst

Wed Sep 14, 2011 3:33 pm

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.
 
commavia
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RE: AA Exec Gets Grilling From Analyst

Wed Sep 14, 2011 4:08 pm

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.
 
Sean-SAN-
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RE: AA Exec Gets Grilling From Analyst

Wed Sep 14, 2011 4:30 pm

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.
 
apodino
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RE: AA Exec Gets Grilling From Analyst

Wed Sep 14, 2011 4:41 pm

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.
 
Jamake1
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RE: AA Exec Gets Grilling From Analyst

Wed Sep 14, 2011 4:50 pm

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."
 
goldenstate
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RE: AA Exec Gets Grilling From Analyst

Wed Sep 14, 2011 4:52 pm

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.
 
LHRFlyer
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RE: AA Exec Gets Grilling From Analyst

Wed Sep 14, 2011 4:53 pm

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]
 
mogandoCI
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RE: AA Exec Gets Grilling From Analyst

Wed Sep 14, 2011 5:11 pm

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
 
commavia
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RE: AA Exec Gets Grilling From Analyst

Wed Sep 14, 2011 5:15 pm

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.
 
jacobin777
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RE: AA Exec Gets Grilling From Analyst

Wed Sep 14, 2011 5:19 pm

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!"
 
ozark1
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RE: AA Exec Gets Grilling From Analyst

Wed Sep 14, 2011 5:57 pm

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.
 
apodino
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RE: AA Exec Gets Grilling From Analyst

Wed Sep 14, 2011 6:04 pm

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?
 
commavia
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RE: AA Exec Gets Grilling From Analyst

Wed Sep 14, 2011 6:21 pm

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.
 
ckfred
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RE: AA Exec Gets Grilling From Analyst

Thu Sep 15, 2011 3:51 pm

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.
 
bonusonus
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RE: AA Exec Gets Grilling From Analyst

Thu Sep 15, 2011 3:59 pm

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

So you're saying they need to go ten-abreast?
 
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IrishAyes
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RE: AA Exec Gets Grilling From Analyst

Thu Sep 15, 2011 4:11 pm

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.
confidence is silent. insecurities are loud.
 
norcal
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RE: AA Exec Gets Grilling From Analyst

Thu Sep 15, 2011 5:00 pm

Quoting mogandoCI (Reply 16):

Oh give the anti-union rhetoric a rest, a strong union doesn't doom an airline to failure. Poor management/employee relationships destroy airlines. Southwest is the most heavily unionized airline in the nation and they are a very successful company with employees that'll bend over backwards to help the company out.

Why do they do this? They have a management team that respects them and doesn't waste every breath complaining about how expensive they are while ignoring all their own mistakes. AMR management should clean house first before asking employees to give up more. Congress is run more efficiently than AMR.

Southwest management doesn't ask their employees to give up huge concessions and then award themselves massive bonuses afterwards

Southwest management doesn't award themselves massive bonuses year after year regardless of the hundreds of millions of dollars the company loses

Southwest doesn't have a bloated and inefficient management structure

Southwest treats its employees like assets not liabilities.
 
micstatic
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RE: AA Exec Gets Grilling From Analyst

Thu Sep 15, 2011 7:46 pm

Quoting norcal (Reply 25):
Oh give the anti-union rhetoric a rest, a strong union doesn't doom an airline to failure. Poor management/employee relationships destroy airlines. Southwest is the most heavily unionized airline in the nation and they are a very successful company with employees that'll bend over backwards to help the company out.

Why do they do this? They have a management team that respects them and doesn't waste every breath complaining about how expensive they are while ignoring all their own mistakes. AMR management should clean house first before asking employees to give up more. Congress is run more efficiently than AMR.

Southwest management doesn't ask their employees to give up huge concessions and then award themselves massive bonuses afterwards

Southwest management doesn't award themselves massive bonuses year after year regardless of the hundreds of millions of dollars the company loses

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 will have to be looked at and adjusted to get competitive. I do agree that no manager at an airline should be getting big bonuses if the company is in the red. At the end of the day, it's nearly impossible to argue that American is not in the worst condition of any big US airline. Major, major changes will have to happen. I will also add that I feel for all those who will be impacted. Never easy by any means.
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ual777
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RE: AA Exec Gets Grilling From Analyst

Thu Sep 15, 2011 10:26 pm

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

Where do you suggest they take their break?

Quoting Jacobin777 (Reply 18):
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

Who exactly is overpaid?

The majors could save hundreds of millions of dollars by treating their pilots better. It is a management position, and it should be treated as such. However, most legacies beat down their pilots and do not give them a lot of support, so they become disgruntled and don't go the extra mile.

I bet that AA could save at least 100 million dollars through fuel savings and operations if they got their pilots onboard.
It is always darkest before the sun comes up.
 
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fxramper
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RE: AA Exec Gets Grilling From Analyst

Fri Sep 16, 2011 2:33 am

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 could have sold those shares back when I thought I was getting ripped off at $23/share. I have no faith in AMR and where they think they can take their airline. Go ahead and run over the workers that kept your company afloat when you should have filed for chp. 11 and trimmed the fat.   
 
ckfred
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RE: AA Exec Gets Grilling From Analyst

Fri Sep 16, 2011 4:05 am

Quoting fxramper (Reply 28):
Go ahead and run over the workers that kept your company afloat when you should have filed for chp. 11 and trimmed the fat.

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 Street analysts and major shareholders. But when you go into Chapter 11, then you have to satisfy a judge, a trustee, and numerous parties represented by high-priced lawyers.

Plus, you wind up paying creditors pennies on the dollar. That's a great way to end long-term business relationships.

I'm not saying that AA did the right thing. But I know business people who should have taken businesses large and small into Chapter 11 and didn't, because of the process and how creditors wind up being treated.
 
washingtonian
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RE: AA Exec Gets Grilling From Analyst

Fri Sep 16, 2011 4:23 am

Quoting goldenstate (Reply 8):
Both DL and UA will have to contend with service consistency and quality issues for a long time to come, perhaps indefinitely

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 the 21 763s will have AVOD in the back (and these 763s are set to be replaced by the 788s in 2016). I wouldn't be surprised to see the 21 763s get AVOD in the back before then anyway. They'll have to figure out where to exclusively deploy 3-class aircraft, but all of the fleet will be pretty similiar.

Delta, admittedly, has a lot of catching up to do but they've made significant strides the past two years. They still have a lot of 767s and A-330s to modify though...
 
jacobin777
Posts: 12262
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RE: AA Exec Gets Grilling From Analyst

Fri Sep 16, 2011 4:59 am

Quoting ual777 (Reply 27):
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

Where do you suggest they take their break?

Something like this:

http://www.airliners.net/photo/KLM--...d=585bb9d334899b748a790bd6ee8de007

Quoting ual777 (Reply 27):
Quoting Jacobin777 (Reply 18):
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

Who exactly is overpaid?

The majors could save hundreds of millions of dollars by treating their pilots better. It is a management position, and it should be treated as such. However, most legacies beat down their pilots and do not give them a lot of support, so they become disgruntled and don't go the extra mile.

Market value/market forces has clearly dictated that AA's employees are overpaid. There is a multitude of analysis done on this. Even union head(s) say "we can be more efficient"..
"Up the Irons!"
 
genybustrvlr
Posts: 105
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RE: AA Exec Gets Grilling From Analyst

Fri Sep 16, 2011 5:05 am

Quoting mogandoCI (Reply 16):
unions always protect the lazy, unproductive, uncompetitive, and weak employee. As long as nothing illegal happened, they can continue to leech off the hardworking.

hear hear
 
norcal
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RE: AA Exec Gets Grilling From Analyst

Fri Sep 16, 2011 11:34 pm

Quoting micstatic (Reply 26):

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 (and still do) about the company. It was the bonuses that caused the strife and brought AA to the situation it is in today. If they treated their employees with a little more respect they'd be more than willing to go the extra mile to save the company. Right now they are all just demoralized.

Quoting Jacobin777 (Reply 31):
Market value/market forces has clearly dictated that AA's employees are overpaid. There is a multitude of analysis done on this. Even union head(s) say "we can be more efficient"..

Southwest is the highest paid labor group in the industry, they make it work because they have a great working relationship with management and find ways to keep the company humming along no matter what is thrown their way. They work hard and efficiently because they are paid well and more importantly are respected by management. If AMR management showed that type of respect to their group the company would turn around in short order.

AMR executives should seriously be studying both Southwest and Continental (the Bethune led turn around) to get ideas on how to build a new corporate culture and company.
 
Rdh3e
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RE: AA Exec Gets Grilling From Analyst

Fri Sep 16, 2011 11:52 pm

Quoting ual777 (Reply 27):
Where do you suggest they take their break?

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 conversation.
 
delta2ual
Posts: 558
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RE: AA Exec Gets Grilling From Analyst

Sat Sep 17, 2011 4:01 pm

Quoting washingtonian (Reply 30):
Not so much. United is pretty close to being consistant

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 standardization and uniforms; and the systemwide staffing metrics that comes with having one contract, which is not even being negotiated yet-Yeah, we're pretty much done.  
From the world's largest airline-to the world's largest airline. Delta2ual
 
jacobin777
Posts: 12262
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RE: AA Exec Gets Grilling From Analyst

Sat Sep 17, 2011 5:21 pm

Quoting norcal (Reply 25):
Oh give the anti-union rhetoric a rest, a strong union doesn't doom an airline to failure. Poor management/employee relationships destroy airlines

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 (90%+) private employees don't unionize.

I am sorry if you are offended or don't believe it, but those are the facts friend.

"American union membership in the private sector has in recent years fallen under 9% — levels not seen since 1932."

http://en.wikipedia.org/wiki/Labor_unions_in_the_United_States#Surveys

Quoting norcal (Reply 33):
Quoting Jacobin777 (Reply 31):
Market value/market forces has clearly dictated that AA's employees are overpaid. There is a multitude of analysis done on this. Even union head(s) say "we can be more efficient"..

Southwest is the highest paid labor group in the industry, they make it work because they have a great working relationship with management and find ways to keep the company humming along no matter what is thrown their way. They work hard and efficiently because they are paid well and more importantly are respected by management. If AMR management showed that type of respect to their group the company would turn around in short order.

WN is a unique case-but they don't have many of the old legacy carrier costs. Also, WN also had some great fuel hedging a few years ago. I also think WN will in a few years have some labor problems like other carriers have had. Maybe not as bad, but it will.

Quoting norcal (Reply 33):
AMR executives should seriously be studying both Southwest and Continental (the Bethune led turn around) to get ideas on how to build a new corporate culture and company.

Regarding WN, I probably agree there. AA management can do a bit more to have a good relationship with unions. Regarding CO, well, they did go into BK twice. In general however, Bethune was well respected.
"Up the Irons!"
 
norcal
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RE: AA Exec Gets Grilling From Analyst

Sat Sep 17, 2011 6:07 pm

Quoting Jacobin777 (Reply 36):
I am sorry if you are offended or don't believe it, but those are the facts friend.

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 in the industry would agree that having a union is necessary. There is a reason why most airline employees are unionized. Every Jet Blue pilot I've ever run into wants to get unionized, the only reason it got voted down last time was because they don't want ALPA to represent them. Quite honestly I don't blame them.

I don't particularly like unions. I wish I kept my dues for myself. However they are very much a necessary evil in this industry and I'd much rather have one then not have one. I've done non-union aviation work before and the working conditions and pay were far worse.

Unfortunately most people equate airline unions to the UAW when that level of power simply doesn't exist with aviation unions. So when I hear all this anti-union rhetoric from people who have never worked a day in their life at an airline I just roll my eyes because they literally have no idea what it's like. It gets especially annoying when these same individuals vigorously defend bonuses for executives who lose $500 million in a quarter.

Quoting Jacobin777 (Reply 36):
Also, WN also had some great fuel hedging a few years ago. I also think WN will in a few years have some labor problems like other carriers have had. Maybe not as bad, but it will.

WN has faced many challenges over the course of it's life. They haven't stayed profitable for 40 years because of fuel hedges. They have met many challenges head on and because of their culture have found ways to get through adversity. If, and I think it's a big IF, they are forced to take pay cuts it'll be much easier for them to do so because their employees trust their leaders.

Quoting Jacobin777 (Reply 36):
WN is a unique case-but they don't have many of the old legacy carrier costs.

If you mean they don't have bloated overpaid management structures then yes I agree.

Quoting Jacobin777 (Reply 36):
Regarding CO, well, they did go into BK twice. In general however, Bethune was well respected.

The bankruptcies didn't save the company they nearly liquidated afterwards despite slashing all of their costs. What ultimately saved them was the corporate culture reinvention they had.

Low labor costs don't make up for poor management. Look at Mesa, they were the worst paid labor group in the industry and they still went bankrupt. They were flat out owned by higher priced regionals like SkyWest.

Even if AA management got every cut they wanted from labor I seriously doubt the company would magically return to profitability because I believe the costs differences are grossly over exaggerated and more importantly the underlying problems with the company would still exist. Continental had the same issues and it wasn't till they fixed the culture and the attitudes and cleaned house that they started to succeed.
 
LAXintl
Topic Author
Posts: 20183
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RE: AA Exec Gets Grilling From Analyst

Wed Sep 21, 2011 8:23 pm

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 Q2 ending of $5.63bil.

Also AMR would likely take a "significant" impairment charges into Q4 due falling values of its older aircraft.


Eagle Eye filing:
http://phx.corporate-ir.net/phoenix....ExOTMxMjUtMTEtMjUyODQxL3htbA%3d%3d

News story
http://aviationblog.dallasnews.com/a...amr-says-unit-revenues-are-up.html


With the updated filing I'm sure analyst will further update their AMR earnings estimates which forecast a $0.56 /share loss in Q3 and total $1.2bil annual loss for the carrier in 2011.

[Edited 2011-09-21 13:28:49]
From the desert to the sea, to all of Southern California
 
commavia
Posts: 9781
Joined: Mon Apr 25, 2005 2:30 am

RE: AA Exec Gets Grilling From Analyst

Wed Sep 21, 2011 8:44 pm

Quoting LAXintl (Reply 38):
One big note was that expected cash will be down a huge $1bil from its Q2 ending of $5.63bil.

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 somewhat in good times (seasons and/or years), and drains in bad times (seasons and/or years). We'll see how that cash balance sits at the end of the winter.

Quoting LAXintl (Reply 38):
Also AMR would likely take a "significant" impairment charges into Q4 due falling values of its older aircraft.

Logical considering those planes will soon be on their way out - another accounting change, but not any actual direct cash impact, thankfully. Could have an indirect impact if any covenants or financing is based on fixed asset ratios, in which case valuations could impact those ratios - not sure how material that impact would be, though.

There are several large airlines in the U.S. that have large asset balances on their balance sheets potentially to be impaired in coming years - AA has a fleet that needs to be written down as its retired; other carriers have huge goodwill balances that may need to be reduced.
 
ckfred
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RE: AA Exec Gets Grilling From Analyst

Wed Sep 21, 2011 8:44 pm

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 out gracefully. Who could the Board select as the next CEO? Obviously, it shouldn't be someone inside the company.

Should the Board look at hiring someone from United/Continental, Delta, or Southwest? What about JetBlue or Virgin America? Or should the Board look at someone outside of the industry, but still in the business of taking car of travelers, such as the hotel or cruise ship industries?

Finally, does the AMR Board have the nerve to dismiss Arpey?
 
LAXintl
Topic Author
Posts: 20183
Joined: Wed May 24, 2000 12:12 pm

RE: AA Exec Gets Grilling From Analyst

Wed Sep 21, 2011 9:01 pm

Quoting commavia (Reply 39):
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 somewhat in good times (seasons and/or years), and drains in bad times (seasons and/or years). We'll see how that cash balance sits at the end of the winter.

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 are expected to post only "modest" loss is very alarming!
From the desert to the sea, to all of Southern California
 
mogandoCI
Posts: 1247
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RE: AA Exec Gets Grilling From Analyst

Wed Sep 21, 2011 9:10 pm

Quoting norcal (Reply 37):
Unfortunately most people equate airline unions to the UAW when that level of power simply doesn't exist with aviation unions. So when I hear all this anti-union rhetoric from people who have never worked a day in their life at an airline I just roll my eyes because they literally have no idea what it's like.

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 compromise. when union bosses treat it as a zero sum game, then everyone loses. Please refer to US Airways as a prime example.

and when you're done justifying why your union boss gets paid $300K simply for shouting into a megaphone and calling for massive disruptions of air/rail/school (you name it) so he can get re-elected, come back to us.

sorry man - in this world of recession, increased competition, and globalization, it's about survival of the fittest, not guaranteed pensions, infinite healthcare, and no-firing clauses.
 
commavia
Posts: 9781
Joined: Mon Apr 25, 2005 2:30 am

RE: AA Exec Gets Grilling From Analyst

Wed Sep 21, 2011 9:13 pm

Quoting LAXintl (Reply 41):
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 are expected to post only "modest" loss is very alarming!

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 cash reduction as "not pretty" and "alarming" are a bit disingenuous. The detail apparently is that of that $1B cash reduction, $500M+ was capex and $340M was debt retirement - i.e., ~85% of the net Q3 cash burn was investment and/or debt reduction.

Don't know exactly where that $500M is all going - some airport stuff, and a few other cats and dogs I'm sure, but likely the vast majority of that is going to new 737 deliveries, which is probably net-net a good thing, not a bad thing, and either way certainly not disastrous as the tone of this and other threads might imply. And $340M in debt retirement is certainly not a bad thing.

Now, as I now feel the need to say here on A.net after every one of these posts: no, this doesn't make me an Arpey acolyte, labor hater, naive AMR apologist, etc. I'm just trying to look at the numbers and fully understand them as I see them - just like everyone else.
 
micstatic
Posts: 607
Joined: Fri Jul 20, 2001 10:07 pm

RE: AA Exec Gets Grilling From Analyst

Wed Sep 21, 2011 9:22 pm

Quoting norcal (Reply 37):
So when I hear all this anti-union rhetoric from people who have never worked a day in their life at an airline I just roll my eyes because they literally have no idea what it's like. It gets especially annoying when these same individuals vigorously defend bonuses for executives who lose $500 million in a quarter.

I don't think we have many people on here defending bonuses for executives at companies who lose money.

Quoting LAXintl (Reply 41):
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 are expected to post only "modest" loss is very alarming!

Fully agree. That is alarming, as well as the disparity between AA's financial performance compared to peers.
S340,DH8,AT7,CR2/7,E135/45/170/190,319,320,717,732,733,734,735,737,738,744,752,762,763,764,772,M80,M90
 
LAXtoATL
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RE: AA Exec Gets Grilling From Analyst

Wed Sep 21, 2011 10:44 pm

Quoting commavia (Reply 43):
. The detail apparently is that of that $1B cash reduction, $500M+ was capex and $340M was debt retirement

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 repayment which is likely little more than the interest they owe on existing debt. Bottom line the majority of those capex and debt figures are recurring not one time expenses and certainly neither popped up out of nowhere, those numbers were expected and planned for all along, the huge change in guidance is almost all operational related. And as LAXintl said for this to be the situation in Q3 is it is alarming and scarry to think what is ahead in Q4 as performance is expected to be even weaker. Another reason American is suddenly taking a huge hit to cash is because they have been stockpiling cash by taking on new debt, but as they advised earlier this year that they had leverage virtually all of their assets that well has run dry - so in a way this really shouldn't be to big of a surprise as that pattern was unsustainable.

[Edited 2011-09-21 16:10:43]
 
norcal
Posts: 1507
Joined: Sun Mar 20, 2005 1:44 am

RE: AA Exec Gets Grilling From Analyst

Thu Sep 22, 2011 1:14 pm

Quoting ckfred (Reply 40):
Who could the Board select as the next CEO? Obviously, it shouldn't be someone inside the company.

Definitely not someone inside of AMR

Quoting ckfred (Reply 40):
Should the Board look at hiring someone from United/Continental, Delta, or Southwest? What about JetBlue or Virgin America? Or should the Board look at someone outside of the industry, but still in the business of taking car of travelers, such as the hotel or cruise ship industries?

Ideally I would pick Bethune or Kelley but neither would likely be available.

Quoting ckfred (Reply 40):
Finally, does the AMR Board have the nerve to dismiss Arpey?

It's a good old boys network like most boards. Look who comprises the BODs of many companies. It is more of who you know and not what you know that gets you to CEO. The good old boys network is also the reason why most CEOs are grossly overcompensated. Look at other nations like Japan where CEOs don't make anywhere near what ours make. The extraordinary levels of compensation we pay our CEOs don't get our companies extraordinary results.

Quoting mogandoCI (Reply 42):
and when you're done justifying why your union boss gets paid $300K simply for shouting into a megaphone and calling for massive disruptions of air/rail/school (you name it) so he can get re-elected, come back to us.

My union boss doesn't get paid 300K and doesn't call for work disruptions. I've never seen anyone use a megaphone. Again you are equating unions like ALPA to the UAW and it shows you really have no idea what you are talking about. There is this law called the Railroad Labor Act that makes it illegal for us to strike or do work disruptions. We must be given permission before we strike.

On the other hand the airline managements industry wide continuously violate our contracts and then we have no recourse besides grievances. The term is "grieve and keep flying" so we must be subject to contract violations for months or even years (often costing us a ton of money) before management is ultimately told to stop violating our contract by the NLRB. All they get is a slap on the wrist and told not to do it again, which they ultimately do anyways.

They routinely violate contracts over and over again with little or no consequences. If I violate my side of the agreement I can get fired.

It'd be like a bank deciding to adjust the rate on your fixed rate mortgage and making you pay. If you say, "Screw that, that's not what we agreed to," you get evicted. So you must keep paying for months or years until the dispute is settled at which point you *might* get some of the money back, but most likely what'll happen is they'll tell the bank to stop charging you the higher rate and go back to the agreed upon rate. Crap like this happens all the time with airlines much to the benefit of management and the degradation of labor.

Quoting mogandoCI (Reply 42):
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 compromise. when union bosses treat it as a zero sum game, then everyone loses. Please refer to US Airways as a prime example.

I'm sorry but there have been concessions after concessions after concessions by airline employees this past decade. In fact it's pretty much been a lost decade for the industry. The only ones who never compromise or make sacrifices are management. Even APA gave significant concessions in pay and benefits after 9/11 to say the company. To say airline employees haven't compromised at all and haven't given significantly out of their wallets is a flat out lie.

Even US Airways has been taken through the ringer twice in bankruptcy and has given up a ton of pay. They are the lowest paid mainline pilots in the industry right now. At some point you need to look elsewhere inside the company for savings but management is too inept or too greedy to do so.

Quoting mogandoCI (Reply 42):
sorry man - in this world of recession, increased competition, and globalization, it's about survival of the fittest, not guaranteed pensions, infinite healthcare, and no-firing clauses.

Guaranteed pensions pretty much don't exist in aviation anymore and infinite health care doesn't either. Please stop making ridiculous claims about airline employees and unions. You clearly have zero understanding about what you are talking about.
 
jacobin777
Posts: 12262
Joined: Sat Sep 11, 2004 6:29 pm

RE: AA Exec Gets Grilling From Analyst

Thu Sep 22, 2011 2:47 pm

Quoting norcal (Reply 37):
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 in the industry would agree that having a union is necessary. There is a reason why most airline employees are unionized. Every Jet Blue pilot I've ever run into wants to get unionized, the only reason it got voted down last time was because they don't want ALPA to represent them. Quite honestly I don't blame them.

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 in the union industry as well. Countless amounts of industries have progressed and thrived w/out the need for unions.

Quoting norcal (Reply 37):
They haven't stayed profitable for 40 years because of fuel hedges

Its a known fact WN was profitable in 2008 (and partially in 2009) strictly due to fuel hedges.

Quoting norcal (Reply 37):
It gets especially annoying when these same individuals vigorously defend bonuses for executives who lose $500 million in a quarter.
Quoting norcal (Reply 37):

Low labor costs don't make up for poor management.

I agree - but it does help! I believe it would also help in AA's case.   

Quoting norcal (Reply 37):
Quoting Jacobin777 (Reply 36):
WN is a unique case-but they don't have many of the old legacy carrier costs.

If you mean they don't have bloated overpaid management structures then yes I agree.
Quoting norcal (Reply 37):
Quoting Jacobin777 (Reply 36):
Regarding CO, well, they did go into BK twice. In general however, Bethune was well respected.

The bankruptcies didn't save the company they nearly liquidated afterwards despite slashing all of their costs. What ultimately saved them was the corporate culture reinvention they had.

Here is an excellent post about Arpey's (and management) pay structure. This should put a complete "kibosh" about pay/bonus:

http://www.flyertalk.com/forum/ameri...look-liquidity-costs-losses-2.html

-its the last post (#30).

Of interest:

"Overall, the management team at AA is very highly leveraged to the stock price (shareholder return) of the organization. While their shares don’t have value today unvested/unexercised most of the senior management would lose $10M+ in potential stock value if the path of bankruptcy is taken.

Bonus - According to page 35, no bonus has been paid out for financial performance of the bonus plan since March 2001. (This doesn't mean retention/special bonuses haven't been approved.)

Performance Shares/Deferred Shares - According to page 26/7 & 35/6, the programs are both setup so that shares are always paid regardless of performance. ("Pay for Performance" - small laugh) For Aprey, while $3.28M in value is shown on the summary compensation table. I would estimate that the effective value will be ~$1.4M-$1.6M.

Stock Appreciation Rights - According to page 38, all of these shares are underwater and have no immediate value."

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Quoting LAXintl (Reply 38):

One big note was that expected cash will be down a huge $1bil from its Q2 ending of $5.63bil.

IIRC, S&P stated the "critical point" for AA to function as an ongoing concern without having to file for BK is $4billion...

Quoting mogandoCI (Reply 42):

sorry man - in this world of recession, increased competition, and globalization, it's about survival of the fittest, not guaranteed pensions, infinite healthcare, and no-firing clauses.

I usually don't agree with you on many things, but here I certainly will!   

Quoting micstatic (Reply 44):
I don't think we have many people on here defending bonuses for executives at companies who lose money.

  . From AA's own corporate filings, it seems they haven't made too much bonuses.

More more quote from the link:

"Cash Bonus Plans
For short term incentives (annual bonus plan) AA must achieve 5% pre-tax earnings margin for executives and other bonus eligible employees to receive a payout."

What was the last time AA made 5% pre-tax earnings? Not in a long time. In other words, no bonus!!   
"Up the Irons!"
 
User avatar
enilria
Posts: 6487
Joined: Fri Feb 22, 2008 7:15 pm

RE: AA Exec Gets Grilling From Analyst

Thu Sep 22, 2011 4:00 pm

Quoting LAXintl (Thread starter):
About focus on only growing in
[quote=Jacobin777,reply=47]Here is an excellent post about Arpey's (and management) pay structure. This should put a complete "kibosh" about pay/bonus:

My experience with news reporting of stock related compensation is that it is rarely accurate. The reporters that write the articles either don't have enough info or do not know enough about the topic to write accurately. For example, the stock is at $4 and an exec gets 1,000,000 shares granted if the stock reaches $8. The article reads: "Exec gets $8 million in stock" . That's basically a lie. It's worth nothing now and is likely to remain worth nothing. If the stock really goes up and triples then they are worth $12 million. It's just a lazy way to report a very complicated financial transaction. Worse, I've seen cases where each year, the exec gets 1 million ( for example) new options every year with 3 year expiration basically priced at double the current stock price to give the exec incentive to get the stock up, but instead it keeps going down for whatever reason. If he/she gets fired they say he got like $50 million by multiplying all these stock options by their strike price and got fired!!! People are so upset, but the reality is he got nothing because all the options are underwater and probably won't be worth anything before they lapse.

Anyway, every case is different, but the reporting of exec compensation is very inaccurate.
 
jacobin777
Posts: 12262
Joined: Sat Sep 11, 2004 6:29 pm

RE: AA Exec Gets Grilling From Analyst

Thu Sep 22, 2011 5:00 pm

Quoting enilria (Reply 48):
My experience with news reporting of stock related compensation is that it is rarely accurate. The reporters that write the articles either don't have enough info or do not know enough about the topic to write accurately. For example, the stock is at $4 and an exec gets 1,000,000 shares granted if the stock reaches $8. The article reads: "Exec gets $8 million in stock" . That's basically a lie. It's worth nothing now and is likely to remain worth nothing. If the stock really goes up and triples then they are worth $12 million. It's just a lazy way to report a very complicated financial transaction. Worse, I've seen cases where each year, the exec gets 1 million ( for example) new options every year with 3 year expiration basically priced at double the current stock price to give the exec incentive to get the stock up, but instead it keeps going down for whatever reason. If he/she gets fired they say he got like $50 million by multiplying all these stock options by their strike price and got fired!!! People are so upset, but the reality is he got nothing because all the options are underwater and probably won't be worth anything before they lapse.

Anyway, every case is different, but the reporting of exec compensation is very inaccurate.

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 "analysis".
"Up the Irons!"