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Rookie87
Posts: 282
Joined: Tue Sep 08, 2015 9:33 pm

Re: FT: Investors bet AA will file for BK

Fri Jul 03, 2020 1:08 am

LAXintl wrote:
8-K confirming agreement on term sheet with the U.S. Treasury for a $4.75 billion loan under the CARES Act. Loan expected to finalize in Q3.

https://americanairlines.gcs-web.com/node/38461/html

The company also announced it has reduced $14.5bil op and CapEx cost for 2020.

Cash burn rate down $35mil/day at end of June.

Will need approx 20,000 fewer employees on payroll come October.


Insane but the progress and improvements are there. 100 million a day to 35 mil a day is insane numbers wise. Some interesting notes in the article linked too. Thanks for posting this.
 
MrPeanut
Posts: 157
Joined: Fri Nov 23, 2018 8:36 pm

Re: FT: Investors bet AA will file for BK

Fri Jul 03, 2020 1:21 am

Rookie87 wrote:
LAXintl wrote:
8-K confirming agreement on term sheet with the U.S. Treasury for a $4.75 billion loan under the CARES Act. Loan expected to finalize in Q3.

https://americanairlines.gcs-web.com/node/38461/html

The company also announced it has reduced $14.5bil op and CapEx cost for 2020.

Cash burn rate down $35mil/day at end of June.

Will need approx 20,000 fewer employees on payroll come October.


Insane but the progress and improvements are there. 100 million a day to 35 mil a day is insane numbers wise. Some interesting notes in the article linked too. Thanks for posting this.


It is still an extremely alarming rate. That is $1 billion a month, and that is during high demand season. The number will get worse in the fall with the seasonal drop in travel. In addition, since the virus is still spreading at an alarming rate, the rate of recovery will be muted.

American may be questioning their decision to return so many planes to the skies with the virus now kicking into high gear. I don't think the demand will be there to support all the capacity they added back.
 
United1
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Joined: Wed Oct 08, 2003 9:21 am

Re: FT: Investors bet AA will file for BK

Fri Jul 03, 2020 2:14 am

MrPeanut wrote:
Rookie87 wrote:
LAXintl wrote:
8-K confirming agreement on term sheet with the U.S. Treasury for a $4.75 billion loan under the CARES Act. Loan expected to finalize in Q3.

https://americanairlines.gcs-web.com/node/38461/html

The company also announced it has reduced $14.5bil op and CapEx cost for 2020.

Cash burn rate down $35mil/day at end of June.

Will need approx 20,000 fewer employees on payroll come October.


Insane but the progress and improvements are there. 100 million a day to 35 mil a day is insane numbers wise. Some interesting notes in the article linked too. Thanks for posting this.


It is still an extremely alarming rate. That is $1 billion a month, and that is during high demand season. The number will get worse in the fall with the seasonal drop in travel. In addition, since the virus is still spreading at an alarming rate, the rate of recovery will be muted.

American may be questioning their decision to return so many planes to the skies with the virus now kicking into high gear. I don't think the demand will be there to support all the capacity they added back.


Cutting their cash flow from 100mil to 35 mil is a great start but I'm not sure their strategy is working.

Projected Q2 results:
UA is expecting 2.7 billion dollar loss on 1.19 billion in revenue.
DL is also expecting a 2.7 billion dollar loss on 1.35 billion in revenue.
AA is expecting 3.7 billion dollar loss on 1.35 billion in revenue.
WN is expecting a 1.6 billion dollar loss on 746 million in revenue.

All of those numbers are pre special items so depending on those the actual numbers could be quite a bit different (ie DL writing off its BK airlines investments ect.)
I know the voices in my head aren't real but sometimes their ideas are just awesome!!!
 
tphuang
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Re: FT: Investors bet AA will file for BK

Fri Jul 03, 2020 2:42 am

keep in mind that most of the past month, bookings have been going up steadily while they have been running the same schedule.

Starting next week, their capacity is going to almost double, so their cost is going up quite a bit. At the same time, online booking has declined by 6.2% last week (the first decline in 8 weeks) https://blueswandaily.com/cartrawler-us ... onsistent/
And flight search trend is down significantly according to kayak (down to levels from late May)
https://www.kayak.com/flight-trends

All this just in time as every carrier is doubling capacity

For a lot of carriers, June will be the low mark in burn rate until October.
 
MrPeanut
Posts: 157
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Re: FT: Investors bet AA will file for BK

Fri Jul 03, 2020 2:59 am

I personally don’t think the pilot / FA layoffs in October will have as big of an impact as it may appear on current burn rates. Yes the airline will save on benefit costs. However, considering pilots and FA’s are paid based on hours flown, the reduction in pilot and FA costs (excluding befits) should already built into their current cash burn rate.

Where AA will see incremental savings would be on any salaried or hourly employees they cut (although I have t heard about much cuts here) and the reduction of flight attendants on their planes - which further erodes AA’s already poor service.
 
Alias1024
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Re: FT: Investors bet AA will file for BK

Fri Jul 03, 2020 4:08 am

MrPeanut wrote:
I personally don’t think the pilot / FA layoffs in October will have as big of an impact as it may appear on current burn rates. Yes the airline will save on benefit costs. However, considering pilots and FA’s are paid based on hours flown, the reduction in pilot and FA costs (excluding befits) should already built into their current cash burn rate.


Pilots and flight attendants have a minimum monthly guaranteed number of hours, regardless of how many the airline schedules them to fly. Right now airlines have crew members getting 70-75 hours a month that haven’t touched an airplane in several weeks.
It is a mistake to think you can solve any major problems with just potatoes.
 
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LAXintl
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Re: FT: Investors bet AA will file for BK

Wed Jul 15, 2020 9:36 pm

AA WARN notices by workgroup. Says it will issue 25,000 notices

Image
https://pbs.twimg.com/media/Ec_zGGMU8AI ... name=large
From the desert to the sea, to all of Southern California
 
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LAXintl
Topic Author
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Re: FT: Investors bet AA will file for BK

Wed Jul 15, 2020 9:40 pm

AA employee letter

Image
Image

https://ibb.co/PzrsLhV][img]https://i.ibb.co/Fqhkrwd/AA1.png
https://ibb.co/XFtY4Hf][img]https://i.ibb.co/8P9YBkn/AA2.png
From the desert to the sea, to all of Southern California
 
MIflyer12
Posts: 8067
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Re: FT: Investors bet AA will file for BK

Wed Jul 15, 2020 9:47 pm

That's a pretty big cut to Dispatch (although it's a small work group). Is that a job where staff are fairly readily replaced? It wouldn't seem so.

The relatively lighter cuts to pilots and maintenance were expected.
 
Boof02671
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Re: FT: Investors bet AA will file for BK

Wed Jul 15, 2020 9:52 pm

Those numbers are worst case scenario
 
CRJ5000
Posts: 146
Joined: Thu Jan 17, 2019 3:06 pm

Re: FT: Investors bet AA will file for BK

Wed Jul 15, 2020 10:15 pm

MIflyer12 wrote:
That's a pretty big cut to Dispatch (although it's a small work group). Is that a job where staff are fairly readily replaced? It wouldn't seem so.

The relatively lighter cuts to pilots and maintenance were expected.


Dispatch is quick and easy to recall, and tied directly to the number of flights operated. If capacity is cut 50% you can cut dispatch close to 50%. Every dispatcher can generally work the entire fleet, so there aren't training events tied to specific aircraft types like pilots and you don't get the cascading displacements like when a junior 737 FO gets furloughed and causes a 757 FO to bump down to the 737, causing a 330 FO to bump down to the 757 and a 777 FO to bump down to the 330.
 
apodino
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Re: FT: Investors bet AA will file for BK

Wed Jul 15, 2020 11:59 pm

CRJ5000 wrote:
MIflyer12 wrote:
That's a pretty big cut to Dispatch (although it's a small work group). Is that a job where staff are fairly readily replaced? It wouldn't seem so.

The relatively lighter cuts to pilots and maintenance were expected.


Dispatch is quick and easy to recall, and tied directly to the number of flights operated. If capacity is cut 50% you can cut dispatch close to 50%. Every dispatcher can generally work the entire fleet, so there aren't training events tied to specific aircraft types like pilots and you don't get the cascading displacements like when a junior 737 FO gets furloughed and causes a 757 FO to bump down to the 737, causing a 330 FO to bump down to the 757 and a 777 FO to bump down to the 330.


Its not quite that simple. Dispatchers lose currency after so long, and then have to go back through recall training in the classroom followed by OJT and then get checked out all over again. Also, if the Jumpseat trip lapses, then the Dispatcher has to go out on that trip as well. With a pilot coming back from furlough, its Ground School, Sim work and then OE. It takes about the same amount of time to bring a pilot back that it does a dispatcher, despite what you said.

Also, if a dispatcher holds an international qualification or something along those lines, there is additional training for that as well.

One other thing to note is that American is planning on replacing their flight planning system by Q2 2022, and all the dispatchers will have to be trained on the new system at some point.
 
CRJ5000
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Re: FT: Investors bet AA will file for BK

Thu Jul 16, 2020 12:10 am

apodino wrote:
CRJ5000 wrote:
MIflyer12 wrote:
That's a pretty big cut to Dispatch (although it's a small work group). Is that a job where staff are fairly readily replaced? It wouldn't seem so.

The relatively lighter cuts to pilots and maintenance were expected.


Dispatch is quick and easy to recall, and tied directly to the number of flights operated. If capacity is cut 50% you can cut dispatch close to 50%. Every dispatcher can generally work the entire fleet, so there aren't training events tied to specific aircraft types like pilots and you don't get the cascading displacements like when a junior 737 FO gets furloughed and causes a 757 FO to bump down to the 737, causing a 330 FO to bump down to the 757 and a 777 FO to bump down to the 330.


Its not quite that simple. Dispatchers lose currency after so long, and then have to go back through recall training in the classroom followed by OJT and then get checked out all over again. Also, if the Jumpseat trip lapses, then the Dispatcher has to go out on that trip as well. With a pilot coming back from furlough, its Ground School, Sim work and then OE. It takes about the same amount of time to bring a pilot back that it does a dispatcher, despite what you said.

Also, if a dispatcher holds an international qualification or something along those lines, there is additional training for that as well.

One other thing to note is that American is planning on replacing their flight planning system by Q2 2022, and all the dispatchers will have to be trained on the new system at some point.


Hmm... I've been a dispatcher for years and this is new to me. Not saying nothing goes into it, but when compared to pilots, the time and money commitment isn't even comparable.
Yes, there's recurrent training that everyone goes though regardless. Yes, you need your jumpseat time once a year no matter what. Recall training would be accomplished in a matter of days/weeks, not months.You would need the comp check annually no matter what. Very easy to bring us back without a whole lot of time or cost. A lot is dependent on the length of furloughs, as well.
 
AA747123
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Re: FT: Investors bet AA will file for BK

Thu Jul 16, 2020 2:41 pm

LAXintl wrote:
AA employee letter

Image
Image

https://ibb.co/PzrsLhV][img]https://i.ibb.co/Fqhkrwd/AA1.png
https://ibb.co/XFtY4Hf][img]https://i.ibb.co/8P9YBkn/AA2.png


In addition the the WARN letters for the 20,000 employees a second round of management and support staff will occur on 10/1 cutting and additional 35% in addition to the 30% already cut.
 
dfw88
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Re: FT: Investors bet AA will file for BK

Thu Jul 16, 2020 2:49 pm

AA747123 wrote:
In addition the the WARN letters for the 20,000 employees a second round of management and support staff will occur on 10/1 cutting and additional 35% in addition to the 30% already cut.


That's news to this AA MSS employee. Source?
 
Sooner787
Posts: 2702
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Re: Updated: American Airlines Business & Finance Discussion

Thu Jul 16, 2020 3:18 pm

Been in the travel biz 30 years, the last 12 working at a very large TMC
booking complex international reservations for road warriors. Today is day 120
of furlough with no end in sight.

Never thought I would have to consider a career switch this late in the game, but
reality is sinking in. I'm now focusing on finding something outside of travel before
the tidal wave of former AA and WN employees hit the streets of DFW October 1st. :(
 
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UPlog
Posts: 565
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Re: Updated: American Airlines Business & Finance Discussion

Tue Jul 21, 2020 5:51 pm

Another person believes American Airlines "go big or go home" attitude to the current COVID-19 crisis and lack of focus on preserving cash increases the likelihood that AA will ultimately be forced into bankruptcy.

American Airlines: Management's Risk-Taking Raises Bankruptcy Risk
https://seekingalpha.com/article/435956 ... uptcy-risk
I fly your boxes
 
Wacker1000
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Re: Updated: American Airlines Business & Finance Discussion

Tue Jul 21, 2020 6:33 pm

So many assumptions that I predict will be incorrect.

"Raja argued that competitors' responses to the COVID-19 crisis (oriented around cutting costs, hoarding cash, and potentially closing hubs) put them on the same path as former American Airlines parent AMR, which survived 9/11 and the Great Recession but finally succumbed to bankruptcy in late 2011."

AA had lucrative routes and a very large loyal client base. It is amazing what you can do when you have income. Also conveniently misses that point that the 2011 bankruptcy was a joke. They had a ton of cash on hand just a complete disregard for managing expenses without going through Chapter 11. When everyone else was fixing their business post 9/11, AA continued on fat, dumb, and happy.

Fuel, equipment, and labor are the three greatest expenses for an airline. What AA should have done during this time is fix the inefficiencies and old ways that caused airlines to waste cash. The industry moved towards leasing aircraft to reduce the financial liability of ownership and reduce the amount of cash required to acquire new aircraft - AA did not. The industry moved towards outsourcing maintenance since it becomes a fixed cost for the operator - AA did not. The industry moved towards power by the hour engine contracts since it removes the financial liability from the operator - AA did not. Other operators reduced fleet size and staffing - AA did not do so to the same levels. They were proud of it at the time but it was the wrong decision.

So here we are almost 20 years later and AA has the worst of all worlds. They were at least a decade late in starting to implement these changes and they still have the very heavy AA cost structure. I wish them luck but the team under Raja's previous leadership couldn't seem to pick a viable route and the cards are already stacked against him in this role.
 
chonetsao
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Joined: Sun Nov 06, 2005 3:55 pm

Re: Updated: American Airlines Business & Finance Discussion

Tue Jul 21, 2020 6:52 pm

Wacker1000 wrote:
Fuel, equipment, and labor are the three greatest expenses for an airline. What AA should have done during this time is fix the inefficiencies and old ways that caused airlines to waste cash. The industry moved towards leasing aircraft to reduce the financial liability of ownership and reduce the amount of cash required to acquire new aircraft - AA did not. The industry moved towards outsourcing maintenance since it becomes a fixed cost for the operator - AA did not. The industry moved towards power by the hour engine contracts since it removes the financial liability from the operator - AA did not. Other operators reduced fleet size and staffing - AA did not do so to the same levels. They were proud of it at the time but it was the wrong decision.


Correct me if I am wrong. Leasing aircrafts and paying engine by hours would incur a minimum monthly payment even if the aircraft sits idle. This is to prevent airline park the aircraft without paying. Thus airline heavily lease aircraft do not necessarily come out ahead as they still have to pay the contractual minimum lease even they can not fly. The savings would be great in the first few months, but the premium would eventually be eroded if the prolonged period of no-fly gets extended. At some point of the time, the expense of lease would overtake the interests of the debt to buy aircraft outright.
 
MrPeanut
Posts: 157
Joined: Fri Nov 23, 2018 8:36 pm

Re: Updated: American Airlines Business & Finance Discuss

Tue Jul 21, 2020 8:40 pm

UPlog wrote:
Another person believes American Airlines "go big or go home" attitude to the current COVID-19 crisis and lack of focus on preserving cash increases the likelihood that AA will ultimately be forced into bankruptcy.

American Airlines: Management's Risk-Taking Raises Bankruptcy Risk
https://seekingalpha.com/article/435956 ... uptcy-risk


Even before their “go big or go home” decision, AA was headed for BK. Their decision to scale up operations was a hail-mary attempt to stay out of BK for as long as possible and hope for a strong recovery soon. I don’t blame them for trying because they had nothing to lose at the time they made the decision.
 
Wacker1000
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Joined: Tue Jan 07, 2014 6:36 pm

Re: Updated: American Airlines Business & Finance Discussion

Tue Jul 21, 2020 9:00 pm

chonetsao wrote:
Wacker1000 wrote:
Fuel, equipment, and labor are the three greatest expenses for an airline. What AA should have done during this time is fix the inefficiencies and old ways that caused airlines to waste cash. The industry moved towards leasing aircraft to reduce the financial liability of ownership and reduce the amount of cash required to acquire new aircraft - AA did not. The industry moved towards outsourcing maintenance since it becomes a fixed cost for the operator - AA did not. The industry moved towards power by the hour engine contracts since it removes the financial liability from the operator - AA did not. Other operators reduced fleet size and staffing - AA did not do so to the same levels. They were proud of it at the time but it was the wrong decision.


Correct me if I am wrong. Leasing aircrafts and paying engine by hours would incur a minimum monthly payment even if the aircraft sits idle. This is to prevent airline park the aircraft without paying. Thus airline heavily lease aircraft do not necessarily come out ahead as they still have to pay the contractual minimum lease even they can not fly. The savings would be great in the first few months, but the premium would eventually be eroded if the prolonged period of no-fly gets extended. At some point of the time, the expense of lease would overtake the interests of the debt to buy aircraft outright.


The main point of leasing versus buying is to conserve cash up front and offloading the liability to the lessor. You're still paying the lease payments but it gives you the ability to do something more beneficial with the cash you didn't have to pay upfront. Leases can also be renegotiated in bankruptcy.

If you previously owned or were making payments, it is also possible to transfer ownership to an aircraft lessor. You receive cash up front to purchase the aircraft then make regular lease payments.
 
chonetsao
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Re: Updated: American Airlines Business & Finance Discussion

Tue Jul 21, 2020 9:51 pm

Wacker1000 wrote:
The main point of leasing versus buying is to conserve cash up front and offloading the liability to the lessor. You're still paying the lease payments but it gives you the ability to do something more beneficial with the cash you didn't have to pay upfront. Leases can also be renegotiated in bankruptcy.

If you previously owned or were making payments, it is also possible to transfer ownership to an aircraft lessor. You receive cash up front to purchase the aircraft then make regular lease payments.


I think you totally misunderstood how AA got their aircraft. They bought many aircrafts with financing, i.e. debt. They did not pay cash up front for the aircraft. It is no difference with lease, except AA pays interests and incremental repayment for the finance. Other airlines that is heavy on lease pay a monthly lease based on usage, with the option to buy out after 10 to 12 years.

Think this way, airlines like Norwegian lease their aircraft is like leasing a $50,000 car from dealer on a 2 years contacts, paying $500 per month plus excess mileage. Airlines like AA buys the car with a 3% financing deal, only paying a monthly payment and interests. If AA is to keep the car for 10 years, the monthly payment is less than $430. Less than the leasing price. [numbers above is fiction and only serves the illustration purpose].

Depends on the deal, buying aircrafts with long term financing option is good for airlines with long term vision. Leasing aircrafts is good for the first few years but ultimately could break an airline (look at Norwegian). If Leasing is so good, you would see all airlines funding all their aircrafts through this way. But the reality is there are plenty airlines have a smaller number on lease yet keep a lot through financing.

Sure, AA has a problem with high debt now with aircraft financing, but as long as financing company and aircraft manufactures see nothing wrong, or AA has enough cash reserve or ability to access cash, things will become good eventually, and AA could be ahead even after the magical debt maturing date. But look at Thai Airways with their restructuring, what is happening to their leased aircraft, and other airlines that caught between on-going lease payment even the aircraft is not flying...The truth is, there is no certain way to judge which way is good until it happened. At this moment we can only speculate and make comments.
 
LJ
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Re: Updated: American Airlines Business & Finance Discussion

Wed Jul 22, 2020 6:48 am

Wacker1000 wrote:
SFuel, equipment, and labor are the three greatest expenses for an airline. What AA should have done during this time is fix the inefficiencies and old ways that caused airlines to waste cash. The industry moved towards leasing aircraft to reduce the financial liability of ownership and reduce the amount of cash required to acquire new aircraft - AA did not. The industry moved towards outsourcing maintenance since it becomes a fixed cost for the operator - AA did not. The industry moved towards power by the hour engine contracts since it removes the financial liability from the operator - AA did not. Other operators reduced fleet size and staffing - AA did not do so to the same levels. They were proud of it at the time but it was the wrong decision.


Thus according to your logic DL is doing something stupid by having its own maintenance facilities and own its aircraft? I always thought Delta TechOps actually made money by selling its service to other airlines. What you probably should have said was that AA should be seeing maintenance as a profit center instead of a cost center. As for owning aircraft, it's the owned aircraft which increases the ability to finance your company (collateral). Moreover, it's not that AA is the only airline owning its aircraft. Most large airlines own their aircraft instead of leasing.
 
Wacker1000
Posts: 230
Joined: Tue Jan 07, 2014 6:36 pm

Re: Updated: American Airlines Business & Finance Discussion

Wed Jul 22, 2020 6:06 pm

chonetsao wrote:
I think you totally misunderstood how AA got their aircraft. They bought many aircrafts with financing, i.e. debt. They did not pay cash up front for the aircraft. It is no difference with lease, except AA pays interests and incremental repayment for the finance. Other airlines that is heavy on lease pay a monthly lease based on usage, with the option to buy out after 10 to 12 years.


No, I completely understand how it works. My point is that in the industry post-9/11 you are safer putting that liability on someone else and it isn't your tax burden but how quickly everyone forgot the difficult times.


LJ wrote:
Thus according to your logic DL is doing something stupid by having its own maintenance facilities and own its aircraft? I always thought Delta TechOps actually made money by selling its service to other airlines. What you probably should have said was that AA should be seeing maintenance as a profit center instead of a cost center.


It depends how well they do it. There isn't enough market for everyone to be an MRO.
 
tphuang
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Joined: Tue Mar 14, 2017 2:04 pm

Re: Updated: American Airlines Business & Finance Discussion

Wed Jul 22, 2020 8:18 pm

A couple of I would devastating tidbit from UA earnings call with relation to AA. We will soon find out how accurate this is.

UA shows it's getting 13% of 2019Q2 revenues on 12% of its capacity.
On the same slide, AA is showing 11% of revenue on 22% of its capacity.

So basically a lot more capacity and less revenue. Not good.

And also UA said they are looking to get back into JFK with other airlines downsizing and returning slots. That seems like an obvious pointer at AA.
 
airlineaddict
Posts: 389
Joined: Wed Jan 19, 2005 12:37 pm

Re: Updated: American Airlines Business & Finance Discussion

Wed Jul 22, 2020 8:51 pm

tphuang wrote:
A couple of I would devastating tidbit from UA earnings call with relation to AA. We will soon find out how accurate this is.

UA shows it's getting 13% of 2019Q2 revenues on 12% of its capacity.
On the same slide, AA is showing 11% of revenue on 22% of its capacity.

So basically a lot more capacity and less revenue. Not good.

And also UA said they are looking to get back into JFK with other airlines downsizing and returning slots. That seems like an obvious pointer at AA.


I believe the 11% of revenue was based on average analyst estimates. We’ll see whether the analysts were close.
 
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LAXintl
Topic Author
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Joined: Wed May 24, 2000 12:12 pm

Re: Updated: American Airlines Business & Finance Discussion

Thu Jul 23, 2020 4:44 pm

American Airlines entered into a Note Purchase Commitment Letter with affiliates of Goldman Sachs (US), pursuant to which the GS have committed to purchase an aggregate of US$1.0 billion in initial principal amount of senior secured notes plus an additional $200 million in initial principal amount of senior notes secured against slots.

https://americanairlines.gcs-web.com/node/38521/html


Interestingly AA also listed its remaining unencumbered assets. Not much left...

Aircraft, Parts, and Equipment - $2,050 (mil)
Corporate Real Estate - $1,130
Other - $590
Total Unencumbered - $3,770
From the desert to the sea, to all of Southern California
 
alasizon
Posts: 2598
Joined: Sat Apr 28, 2007 8:57 pm

Re: Updated: American Airlines Business & Finance Discussion

Thu Jul 23, 2020 5:43 pm

airlineaddict wrote:
tphuang wrote:
A couple of I would devastating tidbit from UA earnings call with relation to AA. We will soon find out how accurate this is.

UA shows it's getting 13% of 2019Q2 revenues on 12% of its capacity.
On the same slide, AA is showing 11% of revenue on 22% of its capacity.

So basically a lot more capacity and less revenue. Not good.

And also UA said they are looking to get back into JFK with other airlines downsizing and returning slots. That seems like an obvious pointer at AA.


I believe the 11% of revenue was based on average analyst estimates. We’ll see whether the analysts were close.


Final results reported show 13.5% of revenue on 23.5% capacity.
AA PRASM 6.48
UA PRASM 7.60
DL PRASM 6.40

AA Pax Revenue was 10.1% of normal
UA was 6.5% of normal
DL was 5.9% of normal
Airport (noun) - A construction site which airplanes tend to frequent
 
Cointrin330
Posts: 2001
Joined: Sat Jul 16, 2016 12:23 pm

Re: Updated: American Airlines Business & Finance Discussion

Thu Jul 23, 2020 6:03 pm

AA and B6 discussing a slot swap between JFK and LGA....with AA giving up some slots at LGA to B6 in exchange for B6 slots at JFK. Interesting....I see these two fumbling toward a merger in 2-5 years.
 
gaystudpilot
Posts: 266
Joined: Sat Dec 08, 2007 10:55 pm

Re: Updated: American Airlines Business & Finance Discussion

Thu Jul 23, 2020 9:58 pm

Cointrin330 wrote:
AA and B6 discussing a slot swap between JFK and LGA....with AA giving up some slots at LGA to B6 in exchange for B6 slots at JFK. Interesting....I see these two fumbling toward a merger in 2-5 years.


AA+AS+B6 by 2024.

And, no, the DOJ will not present many challenges other than a few divestitures. The US airline industry in 2021 is going to be in very rough shape. There is simply too much capacity for foreseeable demand. The industry will be *lucky* if it sees 75% of pre-2020 levels by 2024.

The next wave of consolidation and reformation of players will happen soon. All of them see this. AA’s strategy is much more aggressive in positioning itself for future growth and market share.

Does AA have a history of acquire and kill? Sure. For example, Reno Air and TWA. Will AA execute that same strategy this time? Probably not.

Will AA be successful in this strategy? We don’t know. Will DL and UA be successful with their strategies to address this current environment? We don’t know. But we do know there will be winners and losers. It will be interesting to watch the industry as the next several years unfold.
 
RvA
Posts: 380
Joined: Tue Sep 15, 2015 12:37 pm

Re: Updated: American Airlines Business & Finance Discussion

Thu Jul 23, 2020 10:05 pm

Just because AA has made partnerships with AS and B6 doesn’t mean they will end up merging. AA also was about to expand their partnership with Latam and look where that ended up.
This has happened before in the industry, let’s see where it leads.
 
ShinyAndChrome
Posts: 280
Joined: Fri Aug 28, 2015 1:53 am

Re: Updated: American Airlines Business & Finance Discussion

Thu Jul 23, 2020 10:25 pm

Seriously, where does everyone think the money to fund a merger will come from? Integrating IT and res systems, standardizing fleets and product offerings, this stuff is all extremely expensive people. And that's on top of all the debt that all the airlines will be carrying for a while.
 
SESGDL
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Re: Updated: American Airlines Business & Finance Discussion

Thu Jul 23, 2020 10:31 pm

ShinyAndChrome wrote:
Seriously, where does everyone think the money to fund a merger will come from? Integrating IT and res systems, standardizing fleets and product offerings, this stuff is all extremely expensive people. And that's on top of all the debt that all the airlines will be carrying for a while.


:checkmark: :checkmark: :checkmark:

None of these grandiose ideas that people are posting are even realistic given the economic environment.

Jeremy
 
BNAMealer
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Re: Updated: American Airlines Business & Finance Discussion

Thu Jul 23, 2020 11:57 pm

I think there is a decent chance AA/AS will merge at some point down the road, but not in the imminent future. Why would AS be joining oneworld if that wasn't the case? Sooner or later, AS is gonna have to realize they won't have the scale to survive on their own.

B6 on the other hand? That is going to be much more tricky.

Maybe if AA/AS merge, Brad Tilden could replace Doug Parker and all would be right.
 
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LAXintl
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Re: Updated: American Airlines Business & Finance Discussion

Fri Jul 24, 2020 12:08 am

On this weeks Airline Confidential podcast, Ben Baldanza mentioned how ironic it is because when he was at AA in revenue management early in his career, NYC was what carried the entire airline with its very profitable transcon and Caribbean network. Sadly for AA, over the years competitors have nibbled away at this once cash machine.

Of course maybe we should also probably remember AA was also a hometown airline for NYC being based there until 1979 when it moved to Ft.Worth.
From the desert to the sea, to all of Southern California
 
Cointrin330
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Re: Updated: American Airlines Business & Finance Discussion

Fri Jul 24, 2020 12:25 am

gaystudpilot wrote:
Cointrin330 wrote:
AA and B6 discussing a slot swap between JFK and LGA....with AA giving up some slots at LGA to B6 in exchange for B6 slots at JFK. Interesting....I see these two fumbling toward a merger in 2-5 years.


AA+AS+B6 by 2024.

And, no, the DOJ will not present many challenges other than a few divestitures. The US airline industry in 2021 is going to be in very rough shape. There is simply too much capacity for foreseeable demand. The industry will be *lucky* if it sees 75% of pre-2020 levels by 2024.

The next wave of consolidation and reformation of players will happen soon. All of them see this. AA’s strategy is much more aggressive in positioning itself for future growth and market share.

Does AA have a history of acquire and kill? Sure. For example, Reno Air and TWA. Will AA execute that same strategy this time? Probably not.

Will AA be successful in this strategy? We don’t know. Will DL and UA be successful with their strategies to address this current environment? We don’t know. But we do know there will be winners and losers. It will be interesting to watch the industry as the next several years unfold.


I don't disagree with any of what you say. The US airline industry is headed for a free fall from October 1st when government subsidies run out. Bookings would be slow regardless in the early Fall and this year, there will be no Thanskgiving and December holiday rush. The strange thing about the slot swap is that AA was sitting on unused slots at JFK (it got a waiver last year during the runway reconstruction and repaving project and the waiver was extended once or twice, then slots were returned). AA's cost structure still likely can't support a significant ramp up of domestic feed at JFK unless it faces little to no competition from B6 on any of those routes. So the question is whether AA is looking to ramp up core markets even more at JFK (LAX, SFO, TATL, Latin America) or is it something else? They are seriously looking at swapping out slots at LGA, which until now, make them the strong #2 at LGA which peaked at 178 daily departures just before COVID19 (compared to Delta at 250-258). LGA was arguably AA's strongest station among the big 3 NY Area airports. If they swap those out with B6, I have to wonder if they are setting themselves up for a problem at JFK. We will have to see, but yes, I agree, AA/B6/AS are headed for consolidation. I also think WN will merge with either DL or UA (my bet would be UA, which could use the domestic beef up that WN would give it, even with overlap cut and some hub markets pared to satisfy DOJ concerns). Then what with DL? HA does nothing for them, really. They could buy Spirit, integrate the Airbuses, and have a real gateway in South Florida, but it wouldn't be at MIA.
 
Cointrin330
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Re: Updated: American Airlines Business & Finance Discussion

Fri Jul 24, 2020 12:31 am

LAXintl wrote:
On this weeks Airline Confidential podcast, Ben Baldanza mentioned how ironic it is because when he was at AA in revenue management early in his career, NYC was what carried the entire airline with its very profitable transcon and Caribbean network. Sadly for AA, over the years competitors have nibbled away at this once cash machine.

Of course maybe we should also probably remember AA was also a hometown airline for NYC being based there until 1979 when it moved to Ft.Worth.


It's not that competitors nibbled away at AA's core NYC markets of yesteryear, it is that AA could not compete on cost once B6 entered the market, and specifically, began to expand to the Caribbean. AA's refusal to file Chapter 11 in the wake of 9/11 while others did, further widened the cost per mile and other operational differences between AA and DL, leaving it unable to adequately respond to DL's huge investment in the NY market, which began in 2007 in earnest and cost billions, and was a loss leader, until 2014 when the whole thing finally turned profitable for DL. AA could not make JFK work at all, until just last year, when it finally turned the operation profitable. It did that through a few moves. First, building out the Flagship Lounge at JFK was a smart move. T8, pre-COVID, with its size (the largest terminal at JFK) and quiet periods during the day make it a customer friendly facility relative to T4, T7, and T1. But the real issue was standardizing long haul intercontinental around the 777. AA suddenly had a winning product at JFK with a consistent business class (for the most part, in spite of differences in seats on the 772). All 777s had premium economy quickly. Cargo capacity increased, and the overall product moved up once the awful 767s with their terrible dispatch reliability and dated cabins where phased out of JFK operations, save for one DFW and one MIA.
 
Cointrin330
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Re: Updated: American Airlines Business & Finance Discussion

Fri Jul 24, 2020 12:34 am

RvA wrote:
Just because AA has made partnerships with AS and B6 doesn’t mean they will end up merging. AA also was about to expand their partnership with Latam and look where that ended up.
This has happened before in the industry, let’s see where it leads.


What's interesting here is that AA and B6 had a partnership focused on JFK from the late 2000s to 2013. It was terminated due to the AA/US merger. At the time, AA's JFK intercontinental product (and its transcontinental product) were dated and not competitive, with costly 3-class cabin 772s and unreliable 763s doing the bulk of the flying to Europe and Latin America. The LAX/SFO market was served with 30 year old 762s. The A321T began to be phased in starting in 2014.
 
FSDan
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Re: Updated: American Airlines Business & Finance Discussion

Fri Jul 24, 2020 1:30 am

Cointrin330 wrote:
They are seriously looking at swapping out slots at LGA, which until now, make them the strong #2 at LGA which peaked at 178 daily departures just before COVID19 (compared to Delta at 250-258). LGA was arguably AA's strongest station among the big 3 NY Area airports. If they swap those out with B6, I have to wonder if they are setting themselves up for a problem at JFK.


DL actually was scheduling up to 279 daily departures from LGA in S19 (so about 100 more slots than AA): https://www.airliners.net/forum/viewtopic.php?t=1420613

I agree that it does seem odd for AA to give up slots at an airport where they are relatively stronger to gain some at an airport where they are relatively weaker... Although the fact that they've been using their LGA slots on small markets like CAK, DAY, ILM, ROA, CHO, etc. when they could have been providing more robust schedules to business markets is somewhat telling. It will be interesting to see what comes of this proposed swap.
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tphuang
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Re: Updated: American Airlines Business & Finance Discussion

Fri Jul 24, 2020 2:13 am

FSDan wrote:
Cointrin330 wrote:
They are seriously looking at swapping out slots at LGA, which until now, make them the strong #2 at LGA which peaked at 178 daily departures just before COVID19 (compared to Delta at 250-258). LGA was arguably AA's strongest station among the big 3 NY Area airports. If they swap those out with B6, I have to wonder if they are setting themselves up for a problem at JFK.


DL actually was scheduling up to 279 daily departures from LGA in S19 (so about 100 more slots than AA): https://www.airliners.net/forum/viewtopic.php?t=1420613

I agree that it does seem odd for AA to give up slots at an airport where they are relatively stronger to gain some at an airport where they are relatively weaker... Although the fact that they've been using their LGA slots on small markets like CAK, DAY, ILM, ROA, CHO, etc. when they could have been providing more robust schedules to business markets is somewhat telling. It will be interesting to see what comes of this proposed swap.


Vasu did not say "slot swap". He said a couple of "slot moves" in JFK and LGA. JetBlue is running 90 flights today at JFK, DL 36 and AA 23. Why would it give up slots at JFK when it's going to actually be able to use over 80% of its slots by the time waiver is over?
 
FSDan
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Re: Updated: American Airlines Business & Finance Discussion

Fri Jul 24, 2020 2:22 am

tphuang wrote:
FSDan wrote:
Cointrin330 wrote:
They are seriously looking at swapping out slots at LGA, which until now, make them the strong #2 at LGA which peaked at 178 daily departures just before COVID19 (compared to Delta at 250-258). LGA was arguably AA's strongest station among the big 3 NY Area airports. If they swap those out with B6, I have to wonder if they are setting themselves up for a problem at JFK.


DL actually was scheduling up to 279 daily departures from LGA in S19 (so about 100 more slots than AA): https://www.airliners.net/forum/viewtopic.php?t=1420613

I agree that it does seem odd for AA to give up slots at an airport where they are relatively stronger to gain some at an airport where they are relatively weaker... Although the fact that they've been using their LGA slots on small markets like CAK, DAY, ILM, ROA, CHO, etc. when they could have been providing more robust schedules to business markets is somewhat telling. It will be interesting to see what comes of this proposed swap.


Vasu did not say "slot swap". He said a couple of "slot moves" in JFK and LGA. JetBlue is running 90 flights today at JFK, DL 36 and AA 23. Why would it give up slots at JFK when it's going to actually be able to use over 80% of its slots by the time waiver is over?


So you're saying AA giving slots to B6 at both JFK and LGA, in return for... dropping some unprofitable flying while making sure the slots stay with a partner?
This is my signature until I think of a better one.
 
VS11
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Re: Updated: American Airlines Business & Finance Discussion

Fri Jul 24, 2020 7:51 am

LAXintl wrote:
On this weeks Airline Confidential podcast, Ben Baldanza mentioned how ironic it is because when he was at AA in revenue management early in his career, NYC was what carried the entire airline with its very profitable transcon and Caribbean network. Sadly for AA, over the years competitors have nibbled away at this once cash machine.

Of course maybe we should also probably remember AA was also a hometown airline for NYC being based there until 1979 when it moved to Ft.Worth.


Charlotte is the AA’s hub with largest share of revenue, about 30%, if I recall correctly. Generally, the South has seen significant demographic and economic growth recently and AA has been capitalizing on that with DFW and CLT so no wonder they have not been focusing on fighting it out in NYC. They still have a pretty good coverage in the Northeast but joining forces with JetBlue against Delta is certainly the smarter strategy under the current conditions.
 
tphuang
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Re: Updated: American Airlines Business & Finance Discussion

Fri Jul 24, 2020 10:41 am

FSDan wrote:
tphuang wrote:
FSDan wrote:

DL actually was scheduling up to 279 daily departures from LGA in S19 (so about 100 more slots than AA): https://www.airliners.net/forum/viewtopic.php?t=1420613

I agree that it does seem odd for AA to give up slots at an airport where they are relatively stronger to gain some at an airport where they are relatively weaker... Although the fact that they've been using their LGA slots on small markets like CAK, DAY, ILM, ROA, CHO, etc. when they could have been providing more robust schedules to business markets is somewhat telling. It will be interesting to see what comes of this proposed swap.


Vasu did not say "slot swap". He said a couple of "slot moves" in JFK and LGA. JetBlue is running 90 flights today at JFK, DL 36 and AA 23. Why would it give up slots at JFK when it's going to actually be able to use over 80% of its slots by the time waiver is over?


So you're saying AA giving slots to B6 at both JFK and LGA, in return for... dropping some unprofitable flying while making sure the slots stay with a partner?

Aa is farming out a lot of it’s domestic flying to JetBlue in jfk and lga. Same with Alaska air in lax. I don’t think that’s been a secret. It admitted that in the earnings call. 23% of its capacity on out of these coastal hubs and they have been really unprofitable.
 
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Re: Updated: American Airlines Business & Finance Discussion

Fri Jul 24, 2020 11:52 am

If the airline industry faces permanent reduced demand then yes I think we will see at least an attempt at mergers. Some of that might depend upon the mood of the DOJ. Remember initially the US/AA merger was denied but later approved with certain conditions. If airlines are losing money they will have a much better case. I could see an AA/B6/AS merger (or some combination) under certain conditions albeit it would kill the original business model of B6 and destroy the niche model AS has built.
 
Ciel
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Re: Updated: American Airlines Business & Finance Discussion

Fri Jul 24, 2020 12:45 pm

I am not saying a AA/AS/B6 will never happen. In terms of network, it makes some sense, especially with AS because AA could have a hub in the North West of the US. But as ShinyAndChrome mentioned earlier, mergers require a lot of money. As long as the coronavirus stays, more losses will burden all the airlines. Even with a vaccine, it seems unlikely that people will resume to take flights immediately. But who knows.
 
Cointrin330
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Re: Updated: American Airlines Business & Finance Discussion

Fri Jul 24, 2020 12:48 pm

tphuang wrote:
FSDan wrote:
Cointrin330 wrote:
They are seriously looking at swapping out slots at LGA, which until now, make them the strong #2 at LGA which peaked at 178 daily departures just before COVID19 (compared to Delta at 250-258). LGA was arguably AA's strongest station among the big 3 NY Area airports. If they swap those out with B6, I have to wonder if they are setting themselves up for a problem at JFK.


DL actually was scheduling up to 279 daily departures from LGA in S19 (so about 100 more slots than AA): https://www.airliners.net/forum/viewtopic.php?t=1420613

I agree that it does seem odd for AA to give up slots at an airport where they are relatively stronger to gain some at an airport where they are relatively weaker... Although the fact that they've been using their LGA slots on small markets like CAK, DAY, ILM, ROA, CHO, etc. when they could have been providing more robust schedules to business markets is somewhat telling. It will be interesting to see what comes of this proposed swap.


Vasu did not say "slot swap". He said a couple of "slot moves" in JFK and LGA. JetBlue is running 90 flights today at JFK, DL 36 and AA 23. Why would it give up slots at JFK when it's going to actually be able to use over 80% of its slots by the time waiver is over?


What's your point?
 
Cointrin330
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Re: Updated: American Airlines Business & Finance Discussion

Fri Jul 24, 2020 12:50 pm

FSDan wrote:
Cointrin330 wrote:
They are seriously looking at swapping out slots at LGA, which until now, make them the strong #2 at LGA which peaked at 178 daily departures just before COVID19 (compared to Delta at 250-258). LGA was arguably AA's strongest station among the big 3 NY Area airports. If they swap those out with B6, I have to wonder if they are setting themselves up for a problem at JFK.


DL actually was scheduling up to 279 daily departures from LGA in S19 (so about 100 more slots than AA): https://www.airliners.net/forum/viewtopic.php?t=1420613

I agree that it does seem odd for AA to give up slots at an airport where they are relatively stronger to gain some at an airport where they are relatively weaker... Although the fact that they've been using their LGA slots on small markets like CAK, DAY, ILM, ROA, CHO, etc. when they could have been providing more robust schedules to business markets is somewhat telling. It will be interesting to see what comes of this proposed swap.


Indeed, you're right on the # of daily departures, S19. It was around 275-279 so yes, a full 100 more than AA at the time. As for AA, I know they want to pull 50 seat regional flying down in NY, which affects both JFK and LGA (the bulk of regional flying on AA out of JFK when it is flown has been on ERJs) but at JFK, they had been ramping up the E175 significantly on anything that wasn't a 737 or A321/A319.
 
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jfklganyc
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Re: Updated: American Airlines Business & Finance Discussion

Fri Jul 24, 2020 2:01 pm

FSDan wrote:
tphuang wrote:
FSDan wrote:

DL actually was scheduling up to 279 daily departures from LGA in S19 (so about 100 more slots than AA): https://www.airliners.net/forum/viewtopic.php?t=1420613

I agree that it does seem odd for AA to give up slots at an airport where they are relatively stronger to gain some at an airport where they are relatively weaker... Although the fact that they've been using their LGA slots on small markets like CAK, DAY, ILM, ROA, CHO, etc. when they could have been providing more robust schedules to business markets is somewhat telling. It will be interesting to see what comes of this proposed swap.


Vasu did not say "slot swap". He said a couple of "slot moves" in JFK and LGA. JetBlue is running 90 flights today at JFK, DL 36 and AA 23. Why would it give up slots at JFK when it's going to actually be able to use over 80% of its slots by the time waiver is over?


So you're saying AA giving slots to B6 at both JFK and LGA, in return for... dropping some unprofitable flying while making sure the slots stay with a partner?



Bingo.

Exactly correct.
 
Cointrin330
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Re: Updated: American Airlines Business & Finance Discussion

Fri Jul 24, 2020 2:08 pm

jfklganyc wrote:
FSDan wrote:
tphuang wrote:

Vasu did not say "slot swap". He said a couple of "slot moves" in JFK and LGA. JetBlue is running 90 flights today at JFK, DL 36 and AA 23. Why would it give up slots at JFK when it's going to actually be able to use over 80% of its slots by the time waiver is over?


So you're saying AA giving slots to B6 at both JFK and LGA, in return for... dropping some unprofitable flying while making sure the slots stay with a partner?



Bingo.

Exactly correct.


Slot moves and slot swaps are essentially the same. What's changed is the availability, given the significant drop in flying and capacity that exists at the moment at the airports. Neither B6, DL, or AA are utilizing their full capacity at JFK, nor at LGA. Some flights to key markets could be retimed at JFK by B6 to coincide with AA schedules and vice versa, but the article implied trading of slots in some capacity. Leases, perhaps, and not like what US and DL did several years back at DCA. Either way, this is all lining up to position for a very different future for the industry, which will take a lot longer than people realize to return to its pre-COVID levels, if it ever does and these moves signal another wave of consolidation across the US industry, which will be all but crippled come Q4 with tens of thousands of layoffs and furloughs and sharp capacity cuts will remain in place.
 
AAplat4life
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Re: Updated: American Airlines Business & Finance Discussion

Fri Jul 24, 2020 2:26 pm

On the DFW/CLT mega hub strategy: This was in place before the pandemic and AA management was sticking to it and touting its success is the earnings call yesterday. It’s not very clear that this is successful in terms of overall profitability of the corporation. AA continues to lag it’s competitors in this measure. Other than bringing in a bit more revenue than Delta and United, AA remains less profitable, which at this point equates to higher losses. So I am skeptical that we will see the results Parker is predicting.

On the Alaska and JetBlue alliances: From what I understand, the passenger feed AA is hoping for is to feed its international flights in certain hubs. This seems too optimistic given the depressed state of international markets and with no quick recovery in sight. It is hard to see mergers from these alliances given AA’s high debt load and poor stock performance (despite borrowing to fund stock buybacks over the last several years).

So nothing really new here for AA other than some talking points.
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