SA7700
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AMR Bankruptcy Court Thread Part 3

Thu Aug 23, 2012 6:14 pm

This is a continuation thread of part 2 which can be found here: AMR Bankruptcy Court Thread Part 2


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SA7700
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commavia
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RE: AMR Bankruptcy Court Thread Part 3

Thu Aug 23, 2012 6:31 pm

 
ldvaviation
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RE: AMR Bankruptcy Court Thread Part 3

Thu Aug 23, 2012 6:42 pm

Quoted from norcal (Thread Part 2): "If there was the possibility of a strike (or if AMR management cared at all about employee relations) they would have offered the new Delta contract as a TA. That would have gotten them competitive with the industry and would have gotten at least 51%, if not an overwhelming 90%+ yes vote, and the company wouldn't be in this situation."

AMR is operating under the supervision of bankruptcy court. How does that relate to Delta's situation at all? If AA pilots want the Delta contract, they should do their part to make AA profitable in the long term before asking for Delta's contract. As is, AA's pilots will NOT be taking a pay cut, when every other pilot group, including Delta's, took a pay cut in bankruptcy.

As to the terms that will be imposed by the court, I quote SJUSXM from Thread 2: "The imposed contract has been vetted by the judge and deemed fair to the process of making AA a viable company. The pilots were offered a contract that went beyond that. The pilots rejected it. Now they have to live with the consequences. Of the 111 pages of Judge Lane's decision on the 1113 motion, only 3 had items where he agreed with the APA's position. He must have said 'the Court rejects the APA postion' 40 times."

As to the threat of the pilot's walking, been there and done that. Given the history, I could see a federal judge issuing contempt charges against union leadership and a fine that bankrupts APA.

[Edited 2012-08-23 11:55:14]
 
ldvaviation
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RE: AMR Bankruptcy Court Thread Part 3

Thu Aug 23, 2012 6:54 pm

Quoting commavia (Reply 1):
Parker continues to sweeten the pilots deal to buy them off ...

http://www.thestreet.com/story/11673...YAHOO

What next $10,000 and 100,000 frequent flyer miles to every AA EXP who supports the merger? LOL.

The merger would have happened aleady if there were any real money behind it. Where's the private equity firm or bank with the billions to underwrite all the IOU's Parker has been writing? Watching from the sidelines and having a good laugh at his expense?

With the no furlough clause, fences, minimum block hours stipulation, signing bonus, and pay raises, Parker has already promised much to much for any one with real money to back his takeover of AA. Parker is such an amateur and the pilots look even more foolish for dealing with him.



[Edited 2012-08-23 12:21:49]
 
ckfred
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RE: AMR Bankruptcy Court Thread Part 3

Thu Aug 23, 2012 6:57 pm

Quoting LDVAviation (Reply 2):
As to the threat of the pilot's walking, been there and done that. Given the history, I could see a federal judge issuing contempt charges against union leadership and a fine that bankrupts APA.

First, the APA got in serious trouble over the sick out to protest the QQ merger. APA not only had to pay AA, but it had to deal with lawsuits filed by passengers who couldn't get from A to B.

Second, UA's F/A union threatened CHAOS while dealing with its contract in bankruptcy. Despite picketing at major airports, press releases outline possible strike efforts, and a web site, the F/As never walked off the job for even one flight. My guess is that leadership and legal counsel understood the potential downside, ala APA, and that ALPA was just lucky that management never took the pilots to court over the sick out during the summer of 2000.

Even though one could see the APA becoming more militant in the wake of the T/A being rejected, one has to think that the union leadership understands that a strike could have very serious and permanent consequences.
 
norcal
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RE: AMR Bankruptcy Court Thread Part 3

Thu Aug 23, 2012 7:42 pm

Quoting LDVAviation (Reply 2):
If AA pilots want the Delta contract, they should do their part to make AA profitable in the long term before asking for Delta's contract. As is, AA's pilots will NOT be taking a pay cut, when every other pilot group, including Delta's, took a pay cut in bankruptcy.

Both the term sheet and the TA represented pay cuts. If you don't know that then you don't understand how contracts work.

If AMR wanted to make their company profitable and buy labor peace they would have gone with Delta contract. Instead they have elected to go for the jugular, well I hope they like the results. I'm sure the passengers won't
 
ldvaviation
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RE: AMR Bankruptcy Court Thread Part 3

Thu Aug 23, 2012 11:06 pm

Quoting norcal (Reply 5):
Both the term sheet and the TA represented pay cuts. If you don't know that then you don't understand how contracts work.

If AMR wanted to make their company profitable and buy labor peace they would have gone with Delta contract. Instead they have elected to go for the jugular, well I hope they like the results. I'm sure the passengers won't

Why should AMR have gone with Delta's contract? AMR is not in the same financial position as Delta. Delta is not in bankruptcy; AA is. Did you just overlook this crucial distinction?

When Delta was in bankruptcy, they cut pay rates AND changed the work rules for their pilot's group.

AA has not proposed any cut to pay rates. And, while I very well understand that work rule changes at AA will mean more work for the same pay, do you recognize that when Delta emerged from bankruptcy work rule changes there meant more work for LESS pay?

If APA wants Delta's contract, they will have to wait until AA is consistently profitable. That is what Delta's pilot did and only NOW are they catching up to AA's hourly work rates.
 
norcal
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RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 2:07 pm

Quoting LDVAviation (Reply 6):
Why should AMR have gone with Delta's contract? AMR is not in the same financial position as Delta. Delta is not in bankruptcy; AA is. Did you just overlook this crucial distinction?

Absolutely not, APA needed to take cuts. I'm arguing that AMR doesn't need to impose close to regional airline work rules in order to turn the company around. Frank Lorenzo did the exact same thing with Continental and the company nearly had a third bankruptcy. Slashing employee wages to the bone doesn't = profitability. There has to be a certain realistic investment made in your people to demonstrate that you actually care somewhat about them. That can pay huge dividends in the end. Southwest is a perfect example of this, they are industry leading pay and the most heavily unionized company in the industry. Conventional A-net wisdom is that they should be hemorrhaging money, but they aren't. They are profitable and have been consistently profitable for 40 years and that isn't because of fuel hedges. It's the result of solid management and a fantastic employee/management relationship that leads to industry leading productivity.

Another example is Skywest and ASA/ExpressJet. Both have industry leading contracts and yet both are in solid financial shape. It was Mesa with the lowest paid employees that went bankrupt. Employee concessions won't fix poor management.

Now does AMR need to pay employees industry leading rates? NO! I've never argued that and I've agreed that there needs to be changes to make the company more efficient. I however do not agree that AMR employees need to be the lowest paid in the industry, especially when they are an industry leader in revenue generation. AMR's "tear the jugular out" approach reeks of greed and vengeance. That is not the way to get labor peace and move the company forward. As much as AMR loathes its employees, the company actually needs them and needs them to do a great job to make the company successful. Threats aren't the correct path to success.

An industry standard contract comparable to United and Delta along with all the other structural changes that have occurred in bankruptcy will make the company profitable. I've been shown a company memo by an AA pilot that was written by Horton where he brags about how AMR is leading the industry in revenue performance. How on the one hand do you say that, but then try and force the worst contracts in the industry on your employees and expect them to come along for the ride? Especially after you continually award yourself bonus after bonus despite all the pre-bankruptcy losses?

It's no wonder the employee groups are in open revolt against Horton and there hasn't been any "keep AA, my AA," campaigns. They are begging for a disaster of a merger with US Airways because they have so little confidence and most importantly trust in management. Horton isn't building a foundation for long term success for AA with his actions. This is looking more like a repeat of Lorenzo's Continental....I guess they better hope for another Gordon Bethune to come along and clean up the mess Horton is making.

Quoting LDVAviation (Reply 6):
That is what Delta's pilot did and only NOW are they catching up to AA's hourly work rates.

Incorrect, Delta, American, United, etc. have always had very comparable pay rates, even after the bankruptcy's of everyone else (AA pilots gave back a lot in their voluntary 2003 concessionary contract). Delta is actually going ahead of the pack now. The fact you harp so much on pay rates shows a clear lack of how contracts work. The work rules are a far more important than pay rates and AA pilots will be working more for less pay. A lot of them will flat out be out of work.

AA management set up their proposal in such a way that it makes for great PR bytes, "No pay rate cuts," however there is so many other forms of pay cuts and job losses that are happening; work rules, scheduling changes, B-scale A319, code share, scope clause changes, that will end up costing AA pilots a lot on their W2s if not sending them straight to the street.

All the while the senior executives are going to get hundreds of millions in equity in the company for a "job well done." Even though all they've done is screw creditors and employees. This is no better then the AIG bonuses after tax payer bail outs, only in this case it's the employees bailing out poor management.
 
SJUSXM
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RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 3:59 pm

The pilots were offered a 13.5% stake. That's expected to be over $800 million worth of an emerged AMR. But they rejected it. So dont complain about anyone else's stake.

and Horton has to tout the massive revenue improvements if he wants to keep AA away from US. Parker's entire reasoning behind why AA can't work as a standalone (if AA is too small to compete standalone how has US done it successfully? I dont buy that logic) is that their revenue would lag DL and UA. AA has shown this is not the case on a PRASM basis.
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ldvaviation
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RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 4:09 pm

Quoting norcal (Reply 7):
An industry standard contract comparable to United and Delta along with all the other structural changes that have occurred in bankruptcy will make the company profitable. I've been shown a company memo by an AA pilot that was written by Horton where he brags about how AMR is leading the industry in revenue performance. How on the one hand do you say that, but then try and force the worst contracts in the industry on your employees and expect them to come along for the ride? Especially after you continually award yourself bonus after bonus despite all the pre-bankruptcy losses?

You keep glossing over this crucial fact. AMR is in bankruptcy. It has to pay back its creditors for claims on the estate. It has to increase its return on capital in order to attract new investment, to make good on the equity it uses to satisfy claims on the estate, to pay off the debt it will still have after bankruptcy, and to finance the new planes, interiors, and systems that are crucial to its transformation. That money has to come from somewhere. They can't give it all to the employees and expect to start borrowing again. Prior to bankruptcy, the airline was not keeping up with its competitors because too much of its cash was going to labor costs and debt servicing. Bankruptcy will balance that out.

That is why AMR cannot afford to offer an industry standard contract. It is simply not in the same financial position as Delta or United, regardless of its marginally better revenue performance over the last two quarters.

As to the bonuses, that's just propaganda. All the union groups signed off on the management bonus program when they agreed to their own concessionary contracts. The union groups were offered the same bonuses, but opted instead for more of their salary and benefits. On the other hand, management took a steeper cut in pay and benefits in return for bonuses (stock options). What is unfair about that? As it was, the salary and benefits of the union groups did more to drain AA's cash than the stock options. By the way, those stock options are worthless now, but up to this day AA pilots with their industry leading contract continue to drain AA's cash reserves.

Quoting norcal (Reply 7):
Incorrect, Delta, American, United, etc. have always had very comparable pay rates, even after the bankruptcy's of everyone else (AA pilots gave back a lot in their voluntary 2003 concessionary contract). Delta is actually going ahead of the pack now. The fact you harp so much on pay rates shows a clear lack of how contracts work. The work rules are a far more important than pay rates and AA pilots will be working more for less pay. A lot of them will flat out be out of work.

In the past, I have posted the link to the MIT Airline Data Project. According to them, AA's pilots are the highest paid and the least productive of the four legacy airlines. If you had taken the time to read the transcripts of the 1113 hearings, you would have learned that a consultant to the pilot's union admitted as much in court. BTW, we are not just talking pay rates here, but also benefits and work rules. Till this day, AA's pilots have an active pension plan whereas the others have had theirs either frozen or terminated. Till this day, AA pilots have more of their jobs because they have been insulated from the economic reality of more liberal scope clauses that the other airlines have used to balance capacity to demand.

As to what is comparable, I will repeat this again. When Delta was in bankruptcy, its pilots did not obtain a contract that was at all comparable to AA's. They did not get AA's pay rates, AA's pension, or AA's work rules. They took a pay cut, they had their pension frozen, and they gave up a lot in scope. So what makes AA's pilots so special? Why should they not have to make the sacrifices that Delta pilots had to make?

Truth is, AA's pilots have been living high on the hog for almost a decade while AMR languished and the rest of their industry peers made the necessary financial sacrifices to make United and Delta consistently profitable. Whatever the case, AA pilots have had their day in court. And the judge has in effect concluded that the pilots did not give up nearly enough in their token concessionary contract of 2003.



[Edited 2012-08-24 09:27:29]
 
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par13del
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RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 4:27 pm

Quoting norcal (Reply 7):
As much as AMR loathes its employees,

If that is an accurate situation I would have to say it's the same on both sides, so AA needs to look at Chpt.7 and get this out of the way.
 
commavia
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RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 4:32 pm

Quoting LDVAviation (Reply 9):
As to the bonuses, that's just propaganda. All the union groups signed off on the management bonus program when they agreed to their own concessionary contracts. The union groups were offered the same bonuses, but opted instead for more of their salary and benefits.

Generally true - with one correction. The unions did not "opt out" of stock options. They got the same stock options the executives did - just not as many of them, and theirs were automatic, not based on any performance metric. But, if they cashed out at the right time, some employees stood to (and did) make tens of thousands off their stock options. The pilots, of course, got more than any other work group.

Quoting LDVAviation (Reply 9):
BTW, we are not just talking pay rates here, but also benefits and work rules. Till this day, AA's pilots have an active pension plan whereas the others have had theirs either frozen or terminated. Till this day, AA pilots have more of their jobs because they have been insulated from the economic reality of more liberal scope clauses that the other airlines have used to balance capacity to demand.

Yep. And that last one is really one of the biggest keys often lost in the debate. One big part of AA's problem is that, regardless of the pay scales, they just have so many more people. AA has not been able to spend nearly the last decade shifting nearly as much of their mainline domestic network to non-owned regional operators like Delta, United and USAirways has. As such, while AA mainline unions often want to benchmark against the pay, benefits and productivity of other mainline unions today, that misses that increasingly AA mainline union employees are actually competing against the employees of SkyWest, ExpressJet, Mesa, etc. in more and more markets where AA mainline is competing against Delta Connection, United Express, etc. Or, as another example, AA mechanics often repeat that they are the lowest-paid and worst-compensated among airline mechanics at Delta, United, USAirways, etc., which, while perhaps true in isolation, ignores the fact that those airlines in many cases have thousands upon thousands fewer AMTs today because they overhauls to third parties and/or foreign countries. So rather than benchmarking AA mainline AMT compensation vs Delta mainline AMT compensation, as an example, perhaps the apt comparison is AA mainline AMT compensation vs weighted average of Delta mainline AMT compensation plus HAECO, Aeromexico, Aeroman, or whoever else.

Quoting LDVAviation (Reply 9):
As to what is comparable, I will repeat this again. When Delta was in bankruptcy, its pilots did not obtain a contract that was at all comparable to AA's. They did not get AA's pay rates, AA's pension, or AA's work rules. They took a pay cut, they had their pension frozen, and they gave up a lot in scope. So what makes AA's pilots so special? Why should they not have to make the sacrifices that Delta pilots had to make?

Well, the AA unions now feel that they, once again, shouldn't have to endure the economic reality that has hit their counterparts at other airlines because they can essentially skip the bankruptcy concessions (and by extension several years of bankruptcy contract allowing their employer to "catch up") step and go right to the richer-contract-arising-from-merger step. They claim a "new AA" would be bigger, stronger, and more competitive, and thus be able to pay them more right off the bat. They may be right. We'll see.

Quoting LDVAviation (Reply 9):
Truth is, AA's pilots have been living high on the hog for almost a decade while AMR languished and the rest of their industry peers made the necessary financial sacrifices to make United and Delta consistently profitable.

I don't know if I'd say AA's pilots or any other employees have been living "high on the hog" but it is true that - as even some of the most vocal and militant anti-Horton unionists will admit - AA's employees did benefit enormously over the last 8 years from the fact that AA's 2003 concessions were not via bankruptcy. Thousands of AA employees benefited from higher wages, better work rules, an actively-contributed-to defined benefit pension, and far more restrictive scope/outsourcing provisions than their peers at other airlines. Economic reality did ultimately win - as it always does - but many, many people did benefit in the mean time.

Now, the counter (Laura Glading) argument is that AA employees would now benefit more from working for a stronger, more stable, competitive and financially viable airline. True. But, the corollary to that is that had AA cut deeper in 2003, much of the alleged "failure" of the Arpey era would not have happened, as the company would have had lower, competitive costs and been far stronger, and that would thus have benefited the employees who survived the greater layoffs, outsourcing and cuts that would have come. Interesting thought experiment - I'm sure there are probably plenty of people at AA who fall on both sides of that argument - thinking AA should have just gotten it over with and cut deeper in 2003, and those who are glad the 2003 concessions didn't cost them their jobs/pensions altogether.

Quoting LDVAviation (Reply 9):
Whatever the case, AA pilots have had their day in court. And the judge has in effect concluded that the pilots did not give up nearly enough in their token concessionary contract of 2003.

I wouldn't call the concessions AA's pilots or any other employees gave up in 2003 "token" by any stretch. They were real, they were tangible, and they were large.

But, as has often been said, the only problem is that while everyone - AMR and the unions - thought they were sufficiently large and substantial in 2003, within only a few years they were proven to be not nearly large or substantial enough once virtually all of AMR's legacy peers were in bankruptcy and got far deeper concessions from their work groups. That's why in the immediate period after AMR's 2003 concessions, the 2003-2005 period, AMR was the darling of the legacy airlines, outperforming all of them financially, getting great press and P.R., and favorable coverage from Wall Street analysts and "experts" (many of the same people weighing in now). It was only around 2006-2008, when the industry had restructured to labor costs well below AMR's, that their financial performance began to lag. Ironically, but not coincidentally, that was also precisely when AMR's 2003 contracts were up, and AMR began telling their unions that more would have to be given, to which the unions - at that time - told the company where to go (Arpey=murderer, "restore and more," etc.).

[Edited 2012-08-24 09:38:01]
 
ldvaviation
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RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 4:53 pm

Quoting commavia (Reply 11):
Well, the AA unions now feel that they, once again, shouldn't have to endure the economic reality that has hit their counterparts at other airlines because they can essentially skip the bankruptcy concessions (and by extension several years of bankruptcy contract allowing their employer to "catch up") step and go right to the richer-contract-arising-from-merger step. They claim a "new AA" would be bigger, stronger, and more competitive, and thus be able to pay them more right off the bat. They may be right. We'll see.

I hope no investor comes forward and gives them the chance. There would such a serious moral hazard to that. First, AA employees took advantage of Arpey's moral aversion to bankruptcy. Now, they would be taking advantage of Parker's morally-questionable desire to complete a merger at all costs.

What a despicable business this is turning out to be? And, here I thought it was bad when United terminated its pension plans. This would be much worse.

It is turning out to be a battle of good versus evil. And, from my perspective, Horton represents the good side.
 
commavia
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RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 4:58 pm

Quoting LDVAviation (Reply 12):
I hope no investor comes forward and gives them the chance.

I have complete and total faith in the market to make the right decision long-term. Parker and the unions are convinced they have the right answer and can make it work. If the market decides they can, I say give them the chance. And if they succeed, great - lots of people will benefit as a result. And if they don't, so be it - they all knew going in what it was they were getting in to (or at least they elected leaders responsible for knowing).

Quoting LDVAviation (Reply 12):
First, AA employees took advantage of Arpey's moral aversion to bankruptcy. Now, they would be taking advantage of Parker's morally-questionable desire to complete a merger at all costs.

Again - the unions all think they have the right answer. They have all gone "all in" on Parker. Now let the chips fall where they may. They're making a bet - we may soon all get to see how that bet turns out. It's there call to make, and their right to make it - and they will live with the results one way or another, as they know.
 
phxa340
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RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 5:11 pm

Quoting commavia (Reply 13):
complete and total faith in the market to make the right decision long-term.

Unfortunately, this has been proven false. The market chases short term gains rather than long term viability. This is being discussed heavily on Capital Hill has boards of companies are chasing quick dollars rather than investing in the future on companies. The market will do whatever makes AA produce a quick buck for them to profit then bail.

Short Term = A merger is a beautiful thing
Long Term = A merger is a disaster of epic labor porportions
 
norcal
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RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 5:17 pm

Quoting LDVAviation (Reply 9):
You keep glossing over this crucial fact. AMR is in bankruptcy.

No I'm not, I'm simply pointing out that past companies e.g. Continental, have gone for the labor jugular during bankruptcy it hasn't worked out long term for the organization.

I don't know how much clearer I can make this cuts need to be made but AMR has way over stepped its bound. They don't need to operate like a regional airline in order to get there and if they do impose this term sheet its going to do a lot of damage to the long term survivability of the company. There are intangible aspects here like employee morale that can and will negatively affect the company. Happy employees make airlines like Southwest and JetBlue better than the competition. Miserable employees drive customers away.

Of course if APA does walk then chapter 7 comes along shortly there after, what then for the creditors? Will the term sheet have been worth it then?

Quoting LDVAviation (Reply 9):
It has to pay back its creditors for claims on the estate. It has to increase its return on capital in order to attract new investment, to make good on the equity it uses to satisfy claims on the estate, to pay off the debt it will still have after bankruptcy, and to finance the new planes, interiors, and systems that are crucial to its transformation.

Absolutely, but AMR needs employees on board and giving 100% every day in order to make the company successful. This is a service industry and its the front line employees that make or break the travel experience. Angry employees will drive customers elsewhere and then there won't be money to invest in the company or repay creditors

Quoting LDVAviation (Reply 9):
They can't give it all to the employees and expect to start borrowing again.

I am in no way advocating giving everything to employees. I'm just saying don't take everything from them either. Strike a balance. A TA close to Delta would represent significant concessions by the pilots. Huge gains for the company with scope, code share, work rules, etc.

AMR for years has said they need to be more competitive with Delta and United. I agree, however they don't need to be bleed employees dry.

This is a chance for AMR to retool the company, not only structurally, but also culturally for long term success. Instead this looks like it'll be Lorenzo de-ja-vu.

Quoting commavia (Reply 11):
AA has not been able to spend nearly the last decade shifting nearly as much of their mainline domestic network to non-owned regional operators like Delta, United and USAirways has

Outsourcing isn't a long term viable solution, as Delta recognized with it's recent contract, the regionals are going to be in serious trouble in the next few years when their pilots bail for greener pastures with no one to replace them.

AA could have 300+ E-190s at Eagle (based on the term sheet) + an unlimited number of 50 seaters but they won't have enough pilots to staff them.
 
incitatus
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RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 5:30 pm

Quoting norcal (Reply 15):
Of course if APA does walk then chapter 7 comes along shortly there after

While this is not a good scenario, I would like to see it play out just to watch what happens after. It just seems very naive to assume it works out this way.
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norcal
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RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 5:41 pm

Quoting incitatus (Reply 16):
It just seems very naive to assume it works out this way.

Why? No pilots = no flights = no revenue. How does the company avoid liquidation?
 
ldvaviation
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RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 7:43 pm

Quoting norcal (Reply 17):
Why? No pilots = no flights = no revenue. How does the company avoid liquidation?

It is not that simple. It is unlawful for the APA to stage any work action. That is the case law. Acknowledge the facts before you go concocting wild scenarios.

This is also a two-way street. It is not like the pilots don't have anything to lose. How about their senoritiy, their pensions, their jobs? You think Delta is going to hire all the AA pilots at the same seniority level and make good on their pensions. LOL.

Given all that, Chapter 7 (liquidation) is not as automatic as you make it seem. See S&P's opinion on the APA's announcement that the union would take a strike vote. It amounted to a big yawn.
 
ldvaviation
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RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 7:52 pm

Quoting norcal (Reply 15):
No I'm not, I'm simply pointing out that past companies e.g. Continental, have gone for the labor jugular during bankruptcy it hasn't worked out long term for the organization.

Actually, it did.

Despite its size, Continental thrived after its two turns in bankruptcy court because the tone Lorenzo set with labor made it easier for the executives that followed to position the airline and grow the network.

You misrepresent the facts if you want us to believe that Continental had to merge with United because of what Lorenzo did. Quite the contrary, Continental was an attractive merger partner and its executives ended up managing the new United in part because of some of the things Lorenzo did so many years ago.
 
norcal
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RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 9:02 pm

Quoting LDVAviation (Reply 18):
It is not that simple. It is unlawful for the APA to stage any work action. That is the case law. Acknowledge the facts before you go concocting wild scenarios.

What's the judge going to do? Throw thousands of American pilots in jail for contempt of court? He can't force American pilots to work. Legal or not they may walk and it could be the death of the company.

Even if a significant number of them just decide to quit or retire it will be bad news. Flights will be cancelled and training costs will skyrocket as the company tries to make adjustments.

Quoting LDVAviation (Reply 19):
Despite its size, Continental thrived after its two turns in bankruptcy court because the tone Lorenzo set with labor made it easier for the executives that followed to position the airline and grow the network.

Are you kidding? Do you honestly think Lorenzo turned around Continental?!?!? It was Gordon Bethune that turned around Continental and created a new culture of employee/management cooperation. You should really read, "From Worst to First," it would change your perspective on Lorenzo as a hero. Or simply look at how companies like Southwest and JetBlue handle employee relations.

The Lorenzo method is a ticket for disaster. Industries as labor intensive as airlines need labor peace and investing somewhat in employees buys that and makes everything much smoother. I am in no way saying give labor everything they want but on the same hand don't take everything from them either.

Quoting LDVAviation (Reply 19):
You misrepresent the facts if you want us to believe that Continental had to merge with United because of what Lorenzo did.

No I never said that. Continental was heading for a third, and probably final bankruptcy, despite the two previous bankruptcies. This was back in the early 90's way before United ever entered the picture. Continental was a miserable company after Lorenzo, it was Gordon Bethune that saved Continental from Lorenzo.

Quoting LDVAviation (Reply 19):
Quite the contrary, Continental was an attractive merger partner and its executives ended up managing the new United in part because of some of the things Lorenzo did so many years ago.

No that simply isn't true. First of all Lorenzo nearly destroyed Continental and it wasn't his policies that made the company successful. It was Gordon Bethune and the "Go Forward Plan," that saved Continental. If anything Jeff Smisek is drifting away from what Bethune built and back towards a worse relationship with employees. That is one of the reasons why the United/Continental merger has been no where near as smooth as Delta/Northwest.

http://www.forbes.com/sites/raywang/...in-next-gen-customer-experience/2/
 
norcal
Posts: 1507
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RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 9:10 pm

Quoting LDVAviation (Reply 18):
How about their senoritiy, their pensions, their jobs? You think Delta is going to hire all the AA pilots at the same seniority level and make good on their pensions. LOL.

At some point it simply isn't worth it to come to work anymore and I think all of them fully know what will happen if the company liquidates. I'm sure many of them saw Eastern unfold. It's a dangerous game of chicken they are playing, it's M.A.D.

My point is it shouldn't be like this, but this is typical AMR management style. Instead of turning a page on new employee relations and offering an industry standard contract, which would make the company competitive, they are trying to smash the employees into oblivion. It isn't needed and it's counterproductive to building an airline that'll last. Lorenzo showed us what happens when you hit employees with a hammer. Gordon Bethune showed us what happens when you offer an olive branch.

Again I'm not saying give employees everything. Just be realistic about what is needed. Offering a term sheet worse than US Airways and close to a regional airline when American has such strong revenue numbers is an over reach.
 
LAXintl
Posts: 20183
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RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 9:28 pm

Some more work groups have made their opinions known on AMRs contract offers.

The AE mechanic group voted 65% against the companies term sheet proposal.

While AE fleet service employees voted 67% to accept the companies proposal.

Both groups are represented by the TWU.
From the desert to the sea, to all of Southern California
 
commavia
Posts: 9810
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RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 9:31 pm

Quoting phxa340 (Reply 14):
Unfortunately, this has been proven false.

Not at all. Notice how I said "long-term." I agree that in the short-run, bad decisions will naturally be made - that's natural and inevitable. But over the long-run, the market will always allocate resources most efficiently to the most successful enterprises. That is why, for example, AA, Delta and United survived deregulation and the 1980s intact while Braniff, Pan Am and Eastern ultimately didn't.

Quoting norcal (Reply 15):
I don't know how much clearer I can make this cuts need to be made but AMR has way over stepped its bound.

It's funny - I'm reminded of the mantra I hear AA union members repeating over and over - "management teams get the unions they deserve." Perhaps its a 2-way street. AMR's management could have handled this entire thing differently, and better, both before and after bankruptcy. But, on the flip side, maybe if the APA had been willing, 5 years ago, to come a bit more off of some issues like pensions, scope, productivity, etc., rather than implying Arpey was a murderer, "restore and more," putting up billboards saying AA's planes were unsafe, proposing 55% raises retroactive to 1993 and Superbowl Sunday as a holiday, etc., the company could have lowered its costs and become more competitive earlier, and avoided this fate altogether.

As I have said countless times, both sides - AMR management and AMR's unions - deserve enormous credit for the enormous amount they were able to achieve, but they also both deserve responsibility for where AMR is today. To a certain extent, AMR's unions were either unwilling or unable to accept economic reality staring them in the face when the world (and industry) around them was changing, and AMR management was unwilling or unable to accept that fact and file for bankruptcy sooner. The truth is that both sides have been - at one time or another - ridiculous, unrealistic, intransigent, "greedy," and detached from reality over the last decade. It has not just been management and repeating that line is simply ignorant and myopic, from my perspective.

But, alas, everyone is where they are now. Hindsight is 20/20.

Quoting norcal (Reply 15):
Of course if APA does walk then chapter 7 comes along shortly there after

How astoundingly counterproductive. Not only would those pilots be forfeiting their careers and far more of their pensions, but they would also be totally screwing over the vaunted "profession" though so often proclaim their concern for. Remember your whole line about how the regionals are dying and airlines are allegedly not going to have pilots in five years to fly their jets? Well, problem solved if AA liquidates - you now have a massive pool of unemployed pilots looking for a job. Supply and demand - what would that do to the prevailing cost of a pilot on the open market?

Not saying there aren't irrational people who think the way you're describing - but I'm just calling it what it is: irrational. If they really want to screw the company, but not their peers, the best course of action would be not to run AMR into the ground, but rather to simply resign and get a job elsewhere.

Quoting norcal (Reply 15):
Absolutely, but AMR needs employees on board and giving 100% every day in order to make the company successful. This is a service industry and its the front line employees that make or break the travel experience. Angry employees will drive customers elsewhere and then there won't be money to invest in the company or repay creditors

I don't disagree with you, but I always find it remarkable that AA's unions continually state that AMR's concessions are too severe and unnecessary (which they may well be) because AA needs happy employees. The extension of this logic is that employees won't do their jobs happily for these wages. It's remarkable because there are thousands of people in the U.S. working at regional airlines, to say nothing of JetBlue, Frontier, Spirit, Allegiant, etc. who make less overall than AMR's employees, and yet somehow they manage to come into work happy.

Quoting norcal (Reply 15):
Outsourcing isn't a long term viable solution, as Delta recognized with it's recent contract, the regionals are going to be in serious trouble in the next few years when their pilots bail for greener pastures with no one to replace them.

Funny - you must have been reading a different contract than I did, and than many Delta and industry pilots did who are unhappy with what was passed. By my reading, the new Delta contract wholly endorses outsourcing of pilot jobs to regionals - just not to 50-seaters. Correct me if I'm wrong - Delta is actually able to increase the number of large RJs under the new scope provision, right? Seems to me that is, if anything, hardly an indictment of the long-term viability of outsourcing in general, but merely of 50-seaters specifically.
 
incitatus
Posts: 2718
Joined: Wed Feb 09, 2005 1:49 am

RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 10:03 pm

Quoting norcal (Reply 20):
Throw thousands of American pilots in jail for contempt of court?

You really haven't thought this through. Fines are a common imposition for contempt of court.

Quoting norcal (Reply 21):
Offering a term sheet worse than US Airways

Wasn't there a ~60% vote for the term sheet?
Stop pop up ads
 
justplanenutz
Posts: 563
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RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 10:18 pm

I can't believe no one has brought up the looming Presidential election as an important factor in the APA vs. Horton vs. Parker saga. Imagine in 9 short weeks that Horton has his revised 1113, maybe an injunction against an APA strike (with a potentially long litigation pending) and the guy who everyone knows will ink a back to work order at 12:01 in any strike for the next 4 years wins (and he is apparently leading in many polls). Think the UCC won't take notice of that?
 
norcal
Posts: 1507
Joined: Sun Mar 20, 2005 1:44 am

RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 10:24 pm

Quoting commavia (Reply 23):
How astoundingly counterproductive.

True but there really aren't any card they have since the RLA and the bankruptcy code has stripped labor of all its power. They have nothing left but M.A.D. They might not do it, but it's a possibility and I don't think it ever should have come to this. I think a realistic TA by management would have bought peace and turned morale around. I think that would have fostered pride in American and gotten everyone to do everything they could to speed the bankruptcy process along and be as efficient as possible (i.e. operate like Southwest). Instead I think you'll see absenteeism rise and everyone start doing just their job descriptions which will cost the company millions in lost efficiency.

Quoting commavia (Reply 23):
Not only would those pilots be forfeiting their careers and far more of their pensions, but they would also be totally screwing over the vaunted "profession" though so often proclaim their concern for

How so? If AMR imposes the term sheet then that puts pressure on all the other airlines to try and match their labor costs. The big problem with this industry is that management always turns to employees for cuts when times are tough. As soon as they get them, either voluntarily or through chapter 11, they turn around and expand rapidly into markets (case in point AMR's plan is to expand 20% in the cornerstones) which dilutes yields and erases all the benefits of those concessions. Next the competitors do the exact same thing and every airline is back to losing money again and the cycle repeats. It's a race to the bottom that has no end in sight and employees are sick of it.

As an employee what would be your motivation to give up a significant amount of pay if you know all that's going to happen is management will squander it and come back demanding more cuts and blaming you for the company's woes? It's just like giving money to a drug addict every time they come back begging for money to "clean up their life," how many times will you fall for the same line and watch the same story unfold?

At some point there needs to be a structural change in the way business is done and that just doesn't happen.

Quoting commavia (Reply 23):
Remember your whole line about how the regionals are dying and airlines are allegedly not going to have pilots in five years to fly their jets?

Yes I do remember saying that and would just like to point out an ex-American pilots aren't going to fly for Eagle or SkyWest and sit reserve for $20,000 a year.

Also there is nothing "alleged" about it. Richard Cohen is very concerned about the upcoming shortage.

Quoting commavia (Reply 23):
Well, problem solved if AA liquidates - you now have a massive pool of unemployed pilots looking for a job. Supply and demand - what would that do to the prevailing cost of a pilot on the open market?

You assume all of them would go back to work. Many will simply retire, many probably will quit if the term sheet is imposed. Furthermore that would be temporary respite at best. These guys are old and when they hit 65 they are done, assuming they can all hold medicals that long. There is an expiration date and quite honestly I doubt Delta or United would hire a 60 year old AA pilot knowing they just have to fill his spot in a few years. Training a pilot is very expensive.

Furthermore other carriers will grow to fill the void AA would leave. Would it be a 100% match of capacity? No, but over a several years other carriers will jump on AA's old routes. It's not like Miami would cease to have it's flight schedule because AA disappears. Someone will pick up the pieces. That demand wouldn't evaporate.

Quoting commavia (Reply 23):
Correct me if I'm wrong - Delta is actually able to increase the number of large RJs under the new scope provision, right? Seems to me that is, if anything, hardly an indictment of the long-term viability of outsourcing in general, but merely of 50-seaters specifically.

Yes there are more 76 seaters but DCI is getting cut back significantly and will have fewer planes 450 vs. the 600+ they have now. The old contract actually allowed large regional jet growth that was tied to mainline growth. The new contract has a hard number of aircraft. There are also bigger restrictions placed on code sharing and joint ventures in the new contract.

All those provisions would be big improvements for AMR though over the current APA contract.

Quoting commavia (Reply 23):
The extension of this logic is that employees won't do their jobs happily for these wages. It's remarkable because there are thousands of people in the U.S. working at regional airlines, to say nothing of JetBlue, Frontier, Spirit, Allegiant, etc. who make less overall than AMR's employees, and yet somehow they manage to come into work happy.

It's not just compensation but also the environment that AMR employees work under. It's very different from those companies that treat employees with respect. There are many ways besides money to make employees happy and I think a lot of why AMR employees are upset is not the money but the attitude of management towards employees. Basically how everything is "labor's fault."

I'd say the thousands of people working at regional airlines, at least the pilots, see that as a stepping stone. There are also a lot of people who made lateral moves from regionals to places like Spirit and JetBlue because the pay was better. They may or may not stay there when the legacies start hiring. Some might jump ship again.

Quoting commavia (Reply 23):
But, on the flip side, maybe if the APA had been willing, 5 years ago, to come a bit more off of some issues like pensions, scope, productivity, etc., rather than implying Arpey was a murderer, "restore and more," putting up billboards saying AA's planes were unsafe, proposing 55% raises retroactive to 1993 and Superbowl Sunday as a holiday, etc., the company could have lowered its costs and become more competitive earlier, and avoided this fate altogether.

The fall out from the bonuses post 2003 concessions was simply too big of a pill for labor to swallow. Arpey inherited a lot of that mess but then again kept taking bonuses. I think if the executives had done the morally right thing and hadn't taken bonuses they would have found a much more willing pilot group. That event fueled the extremism from APA and poisoned the labor/management well. I agree it's a two way street, but I think in this case labor made the first move in 2003 and nothing was matched by the senior execs.

The term sheet just screams, "business as usual," for AMR and employees. There was a better way, one that would have built a company with a cost structure that could compete with everyone but also a culture that is better. Cost structures are easy to match, good culture isn't and good culture sets a company up for long term success.
 
LAXdude1023
Posts: 4460
Joined: Thu Sep 07, 2006 3:16 pm

RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 10:27 pm

Quoting norcal (Reply 15):
Of course if APA does walk then chapter 7 comes along shortly there after, what then for the creditors? Will the term sheet have been worth it then?

No, if the APA walks the get ordered back to work as Unions have time and time again when they try this while their employer is in Chapter 11.
It is what it is...
 
commavia
Posts: 9810
Joined: Mon Apr 25, 2005 2:30 am

RE: AMR Bankruptcy Court Thread Part 3

Fri Aug 24, 2012 10:44 pm

Quoting norcal (Reply 26):
True but there really aren't any card they have since the RLA and the bankruptcy code has stripped labor of all its power. They have nothing left but M.A.D.

They can leave. It always amazes me that people overlook the ultimate power they have. Human labor is a service, which its provider is always free (at least in the United States) to withhold. It's called at-will employment, and it's precisely how private industry exerts pressure on 93.1% (as of last year) of the workers in the non-government economy, and it is also how 93.1% of workers in the non-government economy exert pressure right back at private industry. It's always that second part that people seem to forget, overlook or downplay.

Taken to its furthest extreme, if every AA pilot simply resigned tomorrow, the company would liquidate. Period.

Quoting norcal (Reply 26):
Yes there are more 76 seaters but DCI is getting cut back significantly and will have fewer planes 450 vs. the 600+ they have now.

Okay - so I go back to my original question in response to your earlier statement: is that somehow an indictment of the economics of outsourcing pilot jobs in general, or an indictment of the economics of 50-seat regional jets in particular?

Quoting norcal (Reply 26):
It's not just compensation but also the environment that AMR employees work under. It's very different from those companies that treat employees with respect.

Fair.

Quoting norcal (Reply 26):
Basically how everything is "labor's fault."

I get that. It is unfair for anyone to say or imply that everything is "labor's fault." But, it is equally unfair for anyone to say or imply (as the unions do continuously) that everything is "management's fault." While it is true that management made multiple suboptimal decisions, and/or missed out on several key strategic opportunities, over the course of the last decade, it is also true that, in many if not most of those cases, management was actually probably make the best, most economically rational and reasonable decision given the uncompetitive strictures they were having to operate within.

It is not wholly unlike the fiscal situation our country in general finds itself in. Think of AMR management as Congress, the union members as taxpayers, and the union contracts as federal entitlements (Social Security, Medicare, etc.) that the taxpayers both benefit from, but also drive the cost of. In our country today, Congress could literally eliminate the entire discretionary portion of the federal budget (that means 100% of national defense, foreign diplomacy, environmental protection, social services, education, etc.) and still be almost running deficits because of the crushing (and rapidly-growing) burden of entitlements. Until Congress is able and willing to address that massive elephant in the room, all the other budget proposals are simply using a hammer to chip away at a mountain. It was much the same with AMR and its union contracts. In many cases, AMR management did the best they could to keep AMR competitive in as many places as possible as the world changed and the rest of the industry “reset” during 2002-2006. But at some point, the elephant left in the room were the structural inefficiencies, legacy costs, and revenue strictures that perennially kept AMR uncompetitive with its post-bankruptcy peers.

So, for example, AMR should have invested in their fleet (new jets and refurbishing old jet) earlier and faster, like Delta and United did, but was starved of the required capital to do so by the labor and pension obligations those competitors had long ago jettisoned in bankruptcy. AMR should have shifted more of their network to 70-90-seat jets, particularly in Chicago, like all of its legacy peers did, in order to optimize capacity and maximize revenue, but they were unable to do so due to contract restrictions. In order to stay competitive, AMR should have outsourced its heavy overhauls and/or turned its maintenance infrastructure into a profit center, but to some extent it was prohibited from doing so by union protections (although management ineptitude did play a role). AMR should never have “handed” their valuable post-TWA JFK franchise (slots) to Delta as they did, but of course it made sense given AMR’s structural cost disadvantages, as AA had little hope of making money at JFK as post-bankruptcy Delta did. And AMR should have been more proactive and aggressive, sooner, at further expanding internationally and maintaining their post-9/11 lead as America’s “most international” legacy carrier. But, alas, they were restricted to a certain extent in doing so because of a union contract.

This is perhaps one of the clearest examples of how AMR’s union contracts made AMR uncompetitive – not just in terms of directly adding cost, but also in terms of restricting AMR’s ability to remain competitive and generate revenue. As I understand it (and please correct me if I'm wrong), the pilot contract’s “international baseline” provision provided a strong disincentive for AMR to take risks when growing internationally, by punitively linking AMR’s international codesharing relationships to AMR’s own international network growth. AMR had to be extremely risk-averse in adding new routes because doing so, and then potentially retreating, would permanently “reset” the thresholds AMR must meet in order to expand global partnerships. Perhaps even more adversely, once AA did take the plunge into a new market, the provision incentivized the company to keep the flying going, perhaps if only marginally profitable or even unprofitable, because cutting it could trigger a reduction in the amount of international codesharing AMR was contractually permitted to do, even if that codesharing had nothing to do with the given route in question, and even if that codesharing was actually quite profitable for AMR overall. Perhaps that explains why AA kept its Chicago-Delhi flight operating for seven years despite the obvious economic challenges the route faced – that one single route alone generated such a large portion of AMR’s system ASMs, that cutting it would likely have triggered AMR to reduce its codesharing with global partners, and thus deprive AMR of badly needed revenue. Looking at the relative ease and impunity with which Delta and United not only rapidly grew their global networks post-bankruptcy, but in addition also rapidly grew their global codesharing partnerships, just serves to highlight how grossly uncompetitive this provision of the APA contract really was.

Quoting norcal (Reply 26):
The fall out from the bonuses post 2003 concessions was simply too big of a pill for labor to swallow.

No question. But it is ironic, since it is a pill the unions specifically asked for and actively supported right up until it started working precisely as they intended it to.



[Edited 2012-08-24 15:51:35]
 
ldvaviation
Posts: 977
Joined: Sun Dec 21, 2008 7:21 pm

RE: AMR Bankruptcy Court Thread Part 3

Sat Aug 25, 2012 12:33 am

Quoting norcal (Reply 26):
The fall out from the bonuses post 2003 concessions was simply too big of a pill for labor to swallow. Arpey inherited a lot of that mess but then again kept taking bonuses. I think if the executives had done the morally right thing and hadn't taken bonuses they would have found a much more willing pilot group. That event fueled the extremism from APA and poisoned the labor/management well. I agree it's a two way street, but I think in this case labor made the first move in 2003 and nothing was matched by the senior execs.

Are you serious? Not only do you refuse to acknowledge that AA is in bankruptcy, but you also refuse to acknowledge that the unions signed off on those bonuses and that those bonuses were what management got in return for the concessions it (management) made. The unions got stock options too (as Commavia illustrated above), but they didn't get as much as management because they kept more of their salary and benefits. What was morally wrong about any of this?

The morally wrong thing came later, when the unions tried to make it seem as if management was rewarding themselves at the expense of the employees. They were not rewarding themselves any more than the employees were with their industry leading contracts. Despite the structural changes to the industry, Arpey continued to honor those contracts, but the unions did not have the moral rectitude to own up to the fact that the management bonuses were no different than the portion of their wages the unions had not given up in concessions.

Quoting norcal (Reply 26):
How so? If AMR imposes the term sheet then that puts pressure on all the other airlines to try and match their labor costs. The big problem with this industry is that management always turns to employees for cuts when times are tough. As soon as they get them, either voluntarily or through chapter 11, they turn around and expand rapidly into markets (case in point AMR's plan is to expand 20% in the cornerstones) which dilutes yields and erases all the benefits of those concessions. Next the competitors do the exact same thing and every airline is back to losing money again and the cycle repeats. It's a race to the bottom that has no end in sight and employees are sick of it.

As an employee what would be your motivation to give up a significant amount of pay if you know all that's going to happen is management will squander it and come back demanding more cuts and blaming you for the company's woes? It's just like giving money to a drug addict every time they come back begging for money to "clean up their life," how many times will you fall for the same line and watch the same story unfold?

At some point there needs to be a structural change in the way business is done and that just doesn't happen.

Times aren't tough. Times have changed. All the other legacy airlines used the bankruptcy courts to lower their labor costs far below what AA got through voluntary concessions. Do you not see that that is the current economic reality?

As to AMR in particular, what did they squander?

First of all, they did the opposite of what you claim they did. In the face of the structural changes to the industry following the emergence from bankruptcy of all their legacy competitors, AMR pulled back from many domestic markets and did not venture into new international markets (e.g., Africa). But who can blame them? They had the highest labor costs. To keep the whole house of cards from falling, they had to stick to markets where they could still command the revenue premium to justify the salaries of their employees.

On the cost side, excluding salaries/benefits and fuel, AMR has done a better job since 2003 of cutting non-labor costs than the purported savior US Airways. Excluding labor costs, AMR actually has a lower unit cost than US.

So what exactly was squandered? The airline reduced its non-labor costs and tried to run the network in such a way as to justify its employee salaries. In many circles, that would be considered responsible, albeit conservative, management.

Now, why didn't it work? The economic reality had changed. See above. And, it became more and more difficult to sustain that revenue premium when your legacy competitors could use the financial advantages gained from bankruptcy to grow their own networks.

As to structural change, the lack of rationality in the way the legacy airlines operate inures to the benefit of the unions.

No other industry has bargained away its ability to outsource. Well, just one, the US automobile industry. And we saw what happened there. The entire industry almost imploded.

In no other industry do the employees feel entitled to the revenue premium a company earns on its goods. Why should they? The wages of the workers who make luxury handbags do not see their wages rise in sync with the premium customers pay for those handbags.

In no other industry do employees expect to be paid what their peers are paid at another company, regardless of the particular economic circumstances of that company. Yes, wages are comparable for competitive purposes. But there is no pattern bargaining. There is no parity plus one percent.

Would you support these rational changes to the way business is done in the airline business? I doubt it.
 
incitatus
Posts: 2718
Joined: Wed Feb 09, 2005 1:49 am

RE: AMR Bankruptcy Court Thread Part 3

Sat Aug 25, 2012 1:40 am

Quoting norcal (Reply 26):
The big problem with this industry is that management always turns to employees for cuts when times are tough. As soon as they get them, either voluntarily or through chapter 11, they turn around and expand rapidly into markets (case in point AMR's plan is to expand 20% in the cornerstones) which dilutes yields and erases all the benefits of those concessions. Next the competitors do the exact same thing and every airline is back to losing money again and the cycle repeats. It's a race to the bottom that has no end in sight and employees are sick of it.

That is a very narrow description of the competitive dynamics of air travel. A big part in what you call race to the bottom is played by new entrants. Whenever airline employees push wages above market, it attracts investors to new airlines. There is no hiding from the labor market in the US.
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SJUSXM
Posts: 261
Joined: Fri Aug 11, 2006 1:52 pm

RE: AMR Bankruptcy Court Thread Part 3

Sat Aug 25, 2012 6:50 pm

Quoting norcal (Reply 26):
(case in point AMR's plan is to expand 20% in the cornerstones)

Increase departures by 20%. That does not mean increase capacity by 20%. That is not what the company releases have said. They have CONTINUALLY stated that this will increase capacity by a modest 3% or so. The big effects of this will be replacing 140 seat MD80s with smaller planes (E90, CR7 etc) that would be permitted by a new scope clause. This presumably would increase yield as you can now compete with the likes of say a UA in ORD by offering a competitive product based on frequency, which as we have seen in the past, is what is demanded of an airline over size.
AT7, ER3, ER4, ER5, CR7, E70, E75, F100, M82, M83, 722, 732, 738, 752, 762, 763, AB6, 320, 321, 772, 77W
 
PITingres
Posts: 1000
Joined: Fri Dec 21, 2007 1:59 am

RE: AMR Bankruptcy Court Thread Part 3

Sat Aug 25, 2012 7:37 pm

Quoting justplanenutz (Reply 25):
Imagine in 9 short weeks that Horton has his revised 1113, maybe an injunction against an APA strike (with a potentially long litigation pending) and the guy who everyone knows will ink a back to work order at 12:01 in any strike for the next 4 years wins

Here's a better one: imagine that we're electing a President, not a King. Sheesh. What on earth makes anyone think that a back-to-work order would issue from the Oval Office? I can think of maybe one time this happened in the last 3 decades, and the employees in question were government employees, not corporate employees.

In any case, I fail to understand how biting off one's nose makes one's face feel any better.
Fly, you fools! Fly!
 
aluminumtubing
Posts: 342
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RE: AMR Bankruptcy Court Thread Part 3

Sat Aug 25, 2012 8:04 pm

With all due respect, you gotta love all the arm chair quarterbacking from the "outsiders". There is so much misinformation out there, that it would be comical if all this wasn't so serious. I am about as realistic as it gets when it comes to AA and APA. I voted yes, but I am under no false illusions where all this is headed. I honestly feel in my gut, that all the above is mute. I honestly believe that when the judge rules, this will truly be the end of AA as we know it. It will continue, we just don't know in which form and it will not happen overnight, but it will be very sad indeed. I believe that the US/AA combination will occur at some point, but I am not sure whether that will be a good thing or not. The AA/APA fight (and yes BOTH sides are responsible) will tear this airline apart.
 
klkla
Posts: 639
Joined: Fri Jul 16, 2004 8:51 am

RE: AMR Bankruptcy Court Thread Part 3

Sun Aug 26, 2012 9:32 pm

Quoting incitatus (Reply 30):
A big part in what you call race to the bottom is played by new entrants.

Very true. If the unions wanted to protect the living standards of their members they should have been more effective at organizing new entrants and driving up THEIR costs to a level playing field.
 
justplanenutz
Posts: 563
Joined: Fri Feb 10, 2006 9:48 am

RE: AMR Bankruptcy Court Thread Part 3

Sun Aug 26, 2012 9:44 pm

Quoting PITingres (Reply 32):
What on earth makes anyone think that a back-to-work order would issue from the Oval Office?

Um, maybe because of the RLA:

"If either labor or management decline voluntary arbitration, and if in the opinion of the NMB the continuance of the controversy threatens substantially to interrupt interstate commerce in any section of the nation, the NMB is required to notify the President of the United States, who may, at his discretion, create a fact-finding Presidential Emergency Board."

http://www.pennfedbmwe.org/Docs/reference/RLA_Simplified.html

The RLA is by it's nature a political process, and the guy in the Oval Office appoints the NMB, PEB and plays a major role in whether Congress will impose a settlement if the PEB fails.
 
ckfred
Posts: 4734
Joined: Wed Apr 25, 2001 12:50 pm

RE: AMR Bankruptcy Court Thread Part 3

Sun Aug 26, 2012 11:44 pm

I was looking at the APA web site to see if there was any comment about the F/As ratifying their agreement, when I saw something interesting. The APA board voted to direct the officers of the union to prepare to take a strike vote. The vote will be taken, if AA tries to implement the term sheet that is subject to AA's Section 1113.

The question that jumps out is whether the pilots are simply trying exert some negotiating leverage? Or is there enough resolve at APA (both leadership and full membership) to walk.

I remember during the UA bankruptcy that the F/As were putting out daily press releases and updating their web site as to preparations for CHAOS strikes. The F/As felt they were getting a raw deal.

Yet, despite the preparations, the F/As never implemented CHAOS. They got a negotiated contract.

Further, the creditors' committee members, other than the unions, (and presumably future AMR shareholders) put out a statement saying that while they want to see a negotiated contract with the pilots, manaagement should not offer any additional economic benefit to the APA. In other words, between pay, benefits, work rules, scope, and ownership in the reorganized AA, the creditors feel that APA is getting all that management can afford during bankruptcy and the first few years after discharge.

APA is in a pretty tough spot. Obviously, the rank and file want a better contract than what was voted on. I'm assuming that a substantial portion of the membership is willing to strike (even if that sends AA into Chapter 7 liquidation). Yet, a lot of interested parties believe that the T/A is as good a contract as AA can offer for the next few years.

By the same token, I'm not sure how well settled the law is, regarding whether a bargaining unit that is subject to the provisions of the RLA can strike after a contract is imposed under Section 1113 of the Bankruptcy Code. I think there is some case law out there, but I'm pretty sure that the U.S. Supreme Court hasn't ruled, and I don't know if the 2nd Circuit Court of Appeals (which covers New York) has issued a decision.

If the pilots strike, I can see AMR going into court for an injunction and an award of damages, as they did during the work slow down over the QQ merger.

Even a strike of a few days could have some serious consquences for AA. And if AA were to prevail on the injuction, the creditors would be pushing for a huge damage award from APA.
 
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par13del
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RE: AMR Bankruptcy Court Thread Part 3

Mon Aug 27, 2012 12:11 am

Quoting ckfred (Reply 36):
If the pilots strike, I can see AMR going into court for an injunction and an award of damages, as they did during the work slow down over the QQ merger.

The courts would award damages and essentially bankrupt the APA a second time.
Their strategy may be that while the damage is being done AA and the shareholders will be motivated to do a deal, good luck with that one, by that time it will be beyond economics, it will be about pride and who really is in charge. Better to invest your money where you have control versus the inmates running the asylum.

Quoting ckfred (Reply 36):
Even a strike of a few days could have some serious consquences for AA.

Chpt.7 will not create a merger option with US, simply allow DL and UA the better option of coming in and buying up the assets as in routes, not staff and their problems.
 
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RE: AMR Bankruptcy Court Thread Part 3

Mon Aug 27, 2012 12:18 am

Does anyone have a link to the work rule changes at AA?

I agree it would be better if the pilots had a negotiated contract, but I look at AMR's cash flow and I see issues:
http://www.bloomberg.com/quote/AMR:GR/cash-flow

That negative investment cash flow has to be due to writing off aircraft they are exiting leases. But still, there is only so far that can go (however, the A319 replacement of the MD-80 will help quite a bit).

Quoting norcal (Reply 7):
I've been shown a company memo by an AA pilot that was written by Horton where he brags about how AMR is leading the industry in revenue performance. How on the one hand do you say that, but then try and force the worst contracts in the industry on your employees and expect them to come along for the ride? Especially after you continually award yourself bonus after bonus despite all the pre-bankruptcy losses?

There need to be structural changes (as you note later). That includes employee work rules and thus how many employees. Thus time to stop dragging the feet and act.

Quoting aluminumtubing (Reply 33):
I believe that the US/AA combination will occur at some point, but I am not sure whether that will be a good thing or not. The AA/APA fight (and yes BOTH sides are responsible) will tear this airline apart.

I see a possibility of a better airline. New equipment will help. More automation during check in (I like the new LAX process, much better than the old 'snake line.') But if AA doesn't get up per employee productivity... forget it. The A319s, hopefully with paperless cockpits, will be a HUGE boon. The same with replacing 752s with 739ERs.

Quoting SJUSXM (Reply 31):
The big effects of this will be replacing 140 seat MD80s with smaller planes (E90, CR7 etc) that would be permitted by a new scope clause. This presumably would increase yield as you can now compete with the likes of say a UA in ORD by offering a competitive product based on frequency, which as we have seen in the past, is what is demanded of an airline over size.

Not only replace the MD80s with some smaller aircraft (I hope for MRJs and C-series, but lets see), but also replace 50-seat RJs with more 70 seat flying. If that isn't agreed to, just write off AA. DL is going that way and it will change the industry. Lead, follow, or get out of the way...

Lightsaber
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RE: AMR Bankruptcy Court Thread Part 3

Mon Aug 27, 2012 2:26 pm

Quoting lightsaber (Reply 38):
Not only replace the MD80s with some smaller aircraft (I hope for MRJs and C-series, but lets see), but also replace 50-seat RJs with more 70 seat flying. If that isn't agreed to, just write off AA. DL is going that way and it will change the industry. Lead, follow, or get out of the way...

Correct me if I'm wrong, but doesn US Express fly the Embrear 170, while mainline fliies the 190? That may not be an ideal situation for AA/Eagle.,

Here's a thought. AA's commuter carrier(s) fly up to the Canadair 900 (and retire all Embrear 135s and 140s quickly, and phase out the 145s), while mainline flies the C-Series.

Over time, AA and its commuter carrier(s) would have 3 manufacturers, Airbus, Boeing, and Canadair. You reduce the number of manufacturers to deal with. The commuter carrier has 1 type. Every plane flying for AA has a first-class cabin.
 
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RE: AMR Bankruptcy Court Thread Part 3

Mon Aug 27, 2012 2:49 pm

Quoting par13del (Reply 37):
Chpt.7 will not create a merger option with US, simply allow DL and UA the better option of coming in and buying up the assets as in routes, not staff and their problems.
Quoting ckfred (Reply 39):
but doesn US Express fly the Embrear 170, while mainline fliies the 190? That may not be an ideal situation for AA/Eagle.,

Why?

Quoting ckfred (Reply 39):
while mainline flies the C-Series.

At what rate? And why no MRJ/E170?


Quoting ckfred (Reply 39):
The commuter carrier has 1 type.

You picked a type that is losing favor. Why not the other airframes? AMR needs to bid out their regional flying. I do not see a complete end to 50 seat flying, not until the MRJ; it is the first larger airframe with the same per flight costs as the CR2. The others cost more per flight. Once the MRJ is out and 'debugged,' I see a very rapid end to the 50 seaters. (Why fly fewer seats when the cost per flight is the same?)

Quoting ckfred (Reply 39):
Every plane flying for AA has a first-class cabin.

While I like that idea, I'm not certain enough routes will pay for the cabin.

Lightsaber
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RE: AMR Bankruptcy Court Thread Part 3

Mon Aug 27, 2012 3:32 pm

Quoting commavia (Reply 1):

Parker continues to sweeten the pilots deal to buy them off ...

http://www.thestreet.com/story/11673...YAHOO

Here's the trick. There is a guarantee of the number of hours to be flown and that it won't fall more than 15-20%. Also, expect that there will be at least 20% productivity gains among the AMR pilots, that alone equals a 20% layoff even at existing flying levels. My guess is that if you mix the hours guarantee (-15%) with the productivity gain and weigh it across the whole pilot group, you are talking about a 27+% layoff of pilots. Regardless of what guarantees are in there they will find a way to make that happen because otherwise it will just happen in the impending Ch11 of the new AA/US. PHX and alot of CLT will not work with these higher AA labor costs. Additionally, the huge productivity gains directly translate to layoffs. They would need to expand DFW/MIA/ORD by something like 50% to absorb the higher productivity and shut PHX and downsize CLT. Won't happen... Either there is a loophole or it just sets up future Ch11 relief on the layoff clause.

Also, no discussion of the "West pilots". How do they figure in all of this?
 
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RE: AMR Bankruptcy Court Thread Part 3

Mon Aug 27, 2012 5:10 pm

Quoting enilria (Reply 41):
There is a guarantee of the number of hours to be flown and that it won't fall more than 15-20%.
Quoting enilria (Reply 41):
Regardless of what guarantees are in there they will find a way to make that happen because otherwise it will just happen in the impending Ch11 of the new AA/US.

Somthing like defined pension plans which are going the way of the Dodo.
Anyway, it is not whether this plan is viable in the long term, it just needs to be viable in the eyes of the labour groups who can be counted on to make AA's life miserable while in Chpt.11
 
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RE: AMR Bankruptcy Court Thread Part 3

Mon Aug 27, 2012 6:31 pm

Quoting par13del (Reply 42):

Somthing like defined pension plans which are going the way of the Dodo.
Anyway, it is not whether this plan is viable in the long term, it just needs to be viable in the eyes of the labour groups who can be counted on to make AA's life miserable while in Chpt.11

You are right, defined benefit plans are toast. Unions, both private and public sector) have demanded generous plans over the decades which were impossible to maintain, and companies and local Governments agreed to them.

I don't think the majority of AA employees disagree with this, at least I don't. Making AA's life miserable in chapter 11, is not the point of most employees. While the unions need to share some of the blame, AA's management team has always demonstrated its desire to go after employees rather than competitors. All we want is to have this team replaced with one that wants to manage an airiine. That's really the whole idea.
 
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RE: AMR Bankruptcy Court Thread Part 3

Mon Aug 27, 2012 11:37 pm

Quoting aluminumtubing (Reply 43):
I don't think the majority of AA employees disagree with this, at least I don't. Making AA's life miserable in chapter 11, is not the point of most employees. While the unions need to share some of the blame, AA's management team has always demonstrated its desire to go after employees rather than competitors. All we want is to have this team replaced with one that wants to manage an airiine. That's really the whole idea.

Here's the point I've tried to make. Bob Crandall made AA the dominant carrier in the U.S. It was innovative, and it grew massively. But, Crandall did not groom the best talent to run the carrier after his retirement. I've yet to find an AA employee who think Carty, Arpey, or Horton is in the same league as Crandall, in terms of leadership qualities and ability to run the company.

So, why think Doug Parker is the company's savior? He got his start at AA at about the same time as Horton and Arpey, when Crandall was CEO. Yes, he may have a different personality. But then, Carty's personality was the polar opposite of Crandall's. Carty was a geniunely personable guy, while the words that often described Crandall were brusque and abrasive.

Yet, in terms of the way the ran the company and dealt with labor, Carty and Crandall weren't that different.

AA would be better off if it got a new CEO and new COO who never worked a day at AA. I think the CEO should be someone who never worked for an airline, but rather, in another sector of the travel industry (I'm thinking hotels or cruise lines), since they seem to better understand how to take care of a customer. That's something that the airline industry has forgotten, especially since 9/11.

But, you need someone who understands how to make an airline work on a daily basis, which means a seasoned veteran.

Perhaps someone from Jet Blue or Southwest who doesn't want to wait for their CEOs to retire and wants to run an airline now.

If the APA takes the last T/A, with more than 10% ownership interest, plus the APFA's 3%, it wouldn't take that much more to convince other owner/creditors to find a new CEO and management team.
 
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RE: AMR Bankruptcy Court Thread Part 3

Tue Aug 28, 2012 12:18 am

Quoting aluminumtubing (Reply 43):
I don't think the majority of AA employees disagree with this, at least I don't.

Agreed.

However, AA's unions - the unions, not necessarily the employees themselves writ large - in my view, have spent the last five years fighting reality. Several of the key unions simply refused - flat out refused - to accept the reality that the world had changed and the deep, meaningful, admirable concessions they gave in 2003 simply were not sufficient after Delta, Northwest, United and USAirways (twice) went through bankruptcy, and went about shredding their union contracts. After Delta, Northwest, United and USAirways went about systematically freezing and/or dumping their defined benefit pensions, outsourcing overhauls, eviscerating scope, replacing (collectively) hundreds of mainline jets with large RJs, rapidly expanding codesharing relationships (both domestically and internationally), etc., there was simply no way that AA was ever going to be able to compete effectively within the confines of the 2003 contracts. It was simply not possible, and no amount of management acumen or sticktoitiveness was going to change that.

AA tried for years to impress upon the unions these indisputable facts, but many of the unions took the position of "not only no to additional concessions, but we actually want to raise labor costs." This was, in my view, counterproductive and short-sighted in hindsight.

Quoting aluminumtubing (Reply 43):
AA's management team has always demonstrated its desire to go after employees rather than competitors. All we want is to have this team replaced with one that wants to manage an airiine. That's really the whole idea.

I don't know if I'd say "always." Management was quite focused on the competition, to the great benefit of the company and its employees, through the 1980s and most of the 1990s - basically, the Crandall years.

And as for since then, I commiserate with your disappointment at AA's loss of its once-legendary aggressiveness and innovation, and seeming will to compete. But, again, it bears repeating that AA (management and labor) was fighting a battle with at least one hand tied behind its collective back. Its competitors brilliantly used bankruptcy to put AMR - and by extension AMR's employees - at a massive competitive advantage that snowballed as time went on, with higher labor and other operating costs leading to AA being less cost-competitive in domestic and international markets, which led to retrenchment, which hit revenue, which - coupled with the higher labor and operating costs - starved the company of capital needed to invest in technology and new aircraft, and on and on. It was a vicious cycle from which AA was ultimately not able to extract itself.

Quoting ckfred (Reply 44):
But, Crandall did not groom the best talent to run the carrier after his retirement. I've yet to find an AA employee who think Carty, Arpey, or Horton is in the same league as Crandall, in terms of leadership qualities and ability to run the company.

Crandall didn't groom an equal as his successor because he couldn't - he had no equal. Frankly, I don't think there has been an intellect (or personality) like him in the airline industry since he retired. Would anybody debate that Carty, Arpey and Horton are hardly in the "same league" as Crandall? I doubt it. But then again, I think it would be nearly impossible to find another airline executive in general recently who would fit that description.

Quoting ckfred (Reply 44):
So, why think Doug Parker is the company's savior?

I don't think the unions are under any allusion that Doug Parker is the company's "savior."

But they don't, frankly, seem to care at this point. The unions so viscerally hate Horton, his management team, and all they represent, and seem to generally blame that management team entirely for everything has gone wrong in the last decade, to the point that the unions are now willing to take virtually any even seemingly half-qualified alternative. Parker fits the bill.

Plus, of course, there is the undeniable fact that Parker has been a skillful opportunist, and sensing his moment, has been whispering the contractual sweet nothings in the AA unions' ears that are precisely what they want to hear right now.

[Edited 2012-08-27 17:39:30]
 
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RE: AMR Bankruptcy Court Thread Part 3

Tue Aug 28, 2012 3:40 am

Quoting ckfred (Reply 44):
So, why think Doug Parker is the company's savior? He got his start at AA at about the same time as Horton and Arpey, when Crandall was CEO.

I have been with AA for almost 30 years, and for me, the jury is still out as to whether US is a good deal for us, or if we would just be making a pact with the devil. Yes, replacing our senior management team with outsiders would probably offer the best hope, but I don't think that will happen. Most people here just seem to think that Parker would simply be the lesser of two evils given the circumstances. You are right about Crandall. While he was tough, he truly believed in AA and was far more interested in killing the competition than the employees. Since Carty, that has changed to the detriment of AA.

I believe the unions need to recognize the need to be competitive in the changing climate of the industry. However, AA management is zeroing in on the kill instead of working with us to be competitive contract wise. I am not naive. We are in bankruptcy and AA has the AAdvantage. However, I am afraid that going to the mat with us will ultimately be a murder suicide. The situation WILL become untenable. In what form, I truly do not know. I can sense the most anger I have ever witnessed among the pilots at AA. At some point, there may very well be a work stoppage, legal or not. I truly hope cooler heads will prevail on both sides, but I am losing optimism.

[Edited 2012-08-27 20:55:15]

[Edited 2012-08-27 20:55:40]
 
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RE: AMR Bankruptcy Court Thread Part 3

Tue Aug 28, 2012 1:37 pm

Light saber. The cash flow study at Bloomberg is NOT for AMR the airline. Your link is for an Australian mining company with a similar stock symbol. Please revisit your comments using actual information pertaining to the airline. Thanks
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RE: AMR Bankruptcy Court Thread Part 3

Tue Aug 28, 2012 1:40 pm

News out this morning: Parker has signed AMR's NDA, a stipulation of which was that all direct negotiations with AMR unions must cease immediately. Discussions schedule for this week with the APA and USAPA in Dallas have been cancelled.
 
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RE: AMR Bankruptcy Court Thread Part 3

Tue Aug 28, 2012 1:46 pm

Quoting aluminumtubing (Reply 46):
. I am not naive.

The face it: The 60% voting against an agreement made a big mistake.
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