Moderators: richierich, ua900, PanAm_DC10, hOMSaR
LAXintl wrote:While having the largest debt pile in the industry, cash is king during uncertain times so the choice is to hang on to it, and not accelerate debt paydown.
Also honest admission that without federal money, AA might have not made it.
IFLYUA767 wrote:CFO Derek Kerr talked about AA’s balance sheet in an interview today. Looks like they are going to be holding on to their liquidity for a little while longer.
https://sports.yahoo.com/american-airli ... 50955.html
JohanTally wrote:LAXintl wrote:While having the largest debt pile in the industry, cash is king during uncertain times so the choice is to hang on to it, and not accelerate debt paydown.
Also honest admission that without federal money, AA might have not made it.
AA flew more flights than anyone else during the pandemic because their payroll was completely covered by the aid money. These flights were almost all flown at a loss but the obligation of accepting the government aid was to keep everyone on payroll. Because of this they were able to have more flight crews current and ready when demand rebounded which has made their path back to pre-pandemic demand smoother than others. The PSP was instrumental in preventing mass layoffs throughout the entire US aviation sector but I'm not sure if it's the difference between bankruptcy or not for AA.
JohanTally wrote:LAXintl wrote:While having the largest debt pile in the industry, cash is king during uncertain times so the choice is to hang on to it, and not accelerate debt paydown.
Also honest admission that without federal money, AA might have not made it.
AA flew more flights than anyone else during the pandemic because their payroll was completely covered by the aid money. These flights were almost all flown at a loss but the obligation of accepting the government aid was to keep everyone on payroll. Because of this they were able to have more flight crews current and ready when demand rebounded which has made their path back to pre-pandemic demand smoother than others. The PSP was instrumental in preventing mass layoffs throughout the entire US aviation sector but I'm not sure if it's the difference between bankruptcy or not for AA.
JohanTally wrote:LAXintl wrote:Because of this they were able to have more flight crews current and ready when demand rebounded which has made their path back to pre-pandemic demand smoother than others.While having the largest debt pile in the industry, cash is king during uncertain times so the choice is to hang on to it, and not accelerate debt paydown.
LHUSA wrote:JohanTally wrote:LAXintl wrote:Because of this they were able to have more flight crews current and ready when demand rebounded which has made their path back to pre-pandemic demand smoother than others.While having the largest debt pile in the industry, cash is king during uncertain times so the choice is to hang on to it, and not accelerate debt paydown.
How is this statement remotely accurate? American had several, days-long instances where over-scheduling and crew shortages left them in chaos and wreaked havoc on their ops. United is really the only major who avoided these instances by keeping all widebodies (aside from 777PWs) active and all crew active and trained throughout the pandemic - save for a relatively minor blip when Omicron suddenly hit the east coast over Xmas.
JohanTally wrote:LAXintl wrote:While having the largest debt pile in the industry, cash is king during uncertain times so the choice is to hang on to it, and not accelerate debt paydown.
Also honest admission that without federal money, AA might have not made it.
AA flew more flights than anyone else during the pandemic because their payroll was completely covered by the aid money. These flights were almost all flown at a loss but the obligation of accepting the government aid was to keep everyone on payroll. Because of this they were able to have more flight crews current and ready when demand rebounded which has made their path back to pre-pandemic demand smoother than others. The PSP was instrumental in preventing mass layoffs throughout the entire US aviation sector but I'm not sure if it's the difference between bankruptcy or not for AA.
LAXintl wrote:○ Fuel lot higher than forecast.
LAXintl wrote:○ Airline is focused on liquidity, with far more cash ($15.6bil at end of Q2) than normally needed to run the airline.
MIflyer12 wrote:Let's run that through the patented Corporate Communications Gobbledygook Translator, LAXintl.LAXintl wrote:○ Fuel lot higher than forecast.
We won't be generating the profits and free cash flow we previously forecasted to pay down debt.LAXintl wrote:○ Airline is focused on liquidity, with far more cash ($15.6bil at end of Q2) than normally needed to run the airline.
Even when we start generating decent profit we feel we need to hold far more liquidity that we used to, so we're going to be holding a lot of debt for a long time.
That's how I interpret it. Thank you for your posting, LAXintl.
Byrdluvs747 wrote:I've been screaming for years that airlines need to hold very large sums of cash. Yet every time I got a lot of slick responses as to why airlines shouldnt. It seems odd that companies in such a capital intensive industry would have bare bones levels of cash on hand when black swan events have been popping up every 10 years.
MohawkWeekend wrote:Byrdluvs747 wrote:I've been screaming for years that airlines need to hold very large sums of cash. Yet every time I got a lot of slick responses as to why airlines shouldnt. It seems odd that companies in such a capital intensive industry would have bare bones levels of cash on hand when black swan events have been popping up every 10 years.
Good point. Here is my free suggestion -
An airline (or any publicly owned business) cannot sit on tonnes of cash or have low debt without being a take-over target
Twice in the last 20 years taxpayers have bailed out the airlines from black swan's - 9/11 and COVID. Going forward, the US Treasury should set up a backstop for the next crisis which most assuredly will come. It would be the same as the industry funded, govt run insurance for banks and pensions.
A fee of $5 - $10 (or 1%) should be added to every passenger's ticket. This fee would be collected until a suitable balance is accumulated. We have the FDIC and PBGC. This would be the AOAF (Airline Operation Assurance Fee)
lowfareair wrote:MohawkWeekend wrote:Byrdluvs747 wrote:I've been screaming for years that airlines need to hold very large sums of cash. Yet every time I got a lot of slick responses as to why airlines shouldnt. It seems odd that companies in such a capital intensive industry would have bare bones levels of cash on hand when black swan events have been popping up every 10 years.
Good point. Here is my free suggestion -
An airline (or any publicly owned business) cannot sit on tonnes of cash or have low debt without being a take-over target
Twice in the last 20 years taxpayers have bailed out the airlines from black swan's - 9/11 and COVID. Going forward, the US Treasury should set up a backstop for the next crisis which most assuredly will come. It would be the same as the industry funded, govt run insurance for banks and pensions.
A fee of $5 - $10 (or 1%) should be added to every passenger's ticket. This fee would be collected until a suitable balance is accumulated. We have the FDIC and PBGC. This would be the AOAF (Airline Operation Assurance Fee)
There is likely a better way to do this - make airlines pay the insurance policy and they can fund it however they want (issue shares, increase prices, a portion of their profits that are already there, etc.).
The airlines are the ones who do a bunch of buybacks and other items done to enrich the shareholders, it shouldn't directly fall on the taxpayers/customers to pay for their bailouts.
MohawkWeekend wrote:Good point. Here is my free suggestion - [photoid][/photoid]
An airline (or any publicly owned business) cannot sit on tonnes of cash or have low debt without being a take-over target
Twice in the last 20 years taxpayers have bailed out the airlines from black swan's - 9/11 and COVID. Going forward, the US Treasury should set up a backstop for the next crisis which most assuredly will come. It would be the same as the industry funded, govt run insurance for banks and pensions.
A fee of $5 - $10 (or 1%) should be added to every passenger's ticket. This fee would be collected until a suitable balance is accumulated. We have the FDIC and PBGC. This would be the AOAF (Airline Operation Assurance Fee)
Byrdluvs747 wrote:I've been screaming for years that airlines need to hold very large sums of cash. Yet every time I got a lot of slick responses as to why airlines shouldnt. It seems odd that companies in such a capital intensive industry would have bare bones levels of cash on hand when black swan events have been popping up every 10 years.
chonetsao wrote:MohawkWeekend wrote:Good point. Here is my free suggestion - [photoid][/photoid]
An airline (or any publicly owned business) cannot sit on tonnes of cash or have low debt without being a take-over target
Twice in the last 20 years taxpayers have bailed out the airlines from black swan's - 9/11 and COVID. Going forward, the US Treasury should set up a backstop for the next crisis which most assuredly will come. It would be the same as the industry funded, govt run insurance for banks and pensions.
A fee of $5 - $10 (or 1%) should be added to every passenger's ticket. This fee would be collected until a suitable balance is accumulated. We have the FDIC and PBGC. This would be the AOAF (Airline Operation Assurance Fee)
Please don't.
Free market shouldn't need this kind of 'fees'. UK has similar idea on package holiday providers, each ATOL member had to charge customer a fee to guarantee all member's operation in case of financial difficulties. It still however can not stop firms going bankrupt and people got stranded or loose money. The reason is that ATOL only guarantees so much, when a big firm like Thomas Cook going under, there is not enough fund to reach everyone.
If airlines are not behaving as it should, like preserve cash for a rainy day, it should be allowed to go bankrupt or even liquidate without asking consumer for funds. And the people who invested in airline should take the blame, as they were not active enough in the boardroom to make sure the management do their job. Consumers should never be punished to pay the extra tax to support airline management that failed the company. If anything that should change, is the bankrupt law, as well as airline management compensation culture. Management bonus should be withheld for 5-10 years before it is released. And if any managers failed the oversight the airline should be able to cancel the bonus.
tlecam wrote:lowfareair wrote:MohawkWeekend wrote:
Good point. Here is my free suggestion -
An airline (or any publicly owned business) cannot sit on tonnes of cash or have low debt without being a take-over target
Twice in the last 20 years taxpayers have bailed out the airlines from black swan's - 9/11 and COVID. Going forward, the US Treasury should set up a backstop for the next crisis which most assuredly will come. It would be the same as the industry funded, govt run insurance for banks and pensions.
A fee of $5 - $10 (or 1%) should be added to every passenger's ticket. This fee would be collected until a suitable balance is accumulated. We have the FDIC and PBGC. This would be the AOAF (Airline Operation Assurance Fee)
There is likely a better way to do this - make airlines pay the insurance policy and they can fund it however they want (issue shares, increase prices, a portion of their profits that are already there, etc.).
The airlines are the ones who do a bunch of buybacks and other items done to enrich the shareholders, it shouldn't directly fall on the taxpayers/customers to pay for their bailouts.
That assumes that insurance companies are going to develop a business interruption product that doesn't exclude acts of God - 9/11(terrorism) and COVID are both considered acts of God. Unlikely due to the inability to predict frequency and severity of those events.
lowfareair wrote:tlecam wrote:lowfareair wrote:
There is likely a better way to do this - make airlines pay the insurance policy and they can fund it however they want (issue shares, increase prices, a portion of their profits that are already there, etc.).
The airlines are the ones who do a bunch of buybacks and other items done to enrich the shareholders, it shouldn't directly fall on the taxpayers/customers to pay for their bailouts.
That assumes that insurance companies are going to develop a business interruption product that doesn't exclude acts of God - 9/11(terrorism) and COVID are both considered acts of God. Unlikely due to the inability to predict frequency and severity of those events.
They can get that, it just requires a higher premium to mitigate risk.
An alternative way would be to have it be a single entity that they pay into and there are triggers for when they can redeem the money from it (things like a nationwide flight shutdown or stay-at-home orders). I've worked with insurance actuaries before; this is not some insurmountable hurdle to overcome, especially if the government is there to provide overages in the off-chance the insurance fund gets exhausted.
Byrdluvs747 wrote:I've been screaming for years that airlines need to hold very large sums of cash. Yet every time I got a lot of slick responses as to why airlines shouldnt. It seems odd that companies in such a capital intensive industry would have bare bones levels of cash on hand when black swan events have been popping up every 10 years.
MohawkWeekend wrote:US Airlines quit operating in a free market when they received $55 billion dollars in payroll support. America has decided that airlines are too big to fai and too critical to the economy. Just like our pensions and banks. So instead of making everyone including non-flyers bailout the industry, a user fee should be paid to provide a backstop when COVID Mk II shows up. Banks pay a certain amount per deposit and companies insure their pensions the same way.
And no - it can't be private insurance or bonds. Both of those can fail and are subject to fraud. The fund needs to be backstopped by the US Treasury just like the PBGC and FDIC.
MohawkWeekend wrote:Byrdluvs747 wrote:I've been screaming for years that airlines need to hold very large sums of cash. Yet every time I got a lot of slick responses as to why airlines shouldnt. It seems odd that companies in such a capital intensive industry would have bare bones levels of cash on hand when black swan events have been popping up every 10 years.
Good point. Here is my free suggestion -
An airline (or any publicly owned business) cannot sit on tonnes of cash or have low debt without being a take-over target
Twice in the last 20 years taxpayers have bailed out the airlines from black swan's - 9/11 and COVID. Going forward, the US Treasury should set up a backstop for the next crisis which most assuredly will come. It would be the same as the industry funded, govt run insurance for banks and pensions.
A fee of $5 - $10 (or 1%) should be added to every passenger's ticket. This fee would be collected until a suitable balance is accumulated. We have the FDIC and PBGC. This would be the AOAF (Airline Operation Assurance Fee)
chonetsao wrote:Airlines should be allowed to fail. Management made decisions that caused failure, the blame is on management. If you want to convince anyone that your idea is superb, you have to answer the questions why consumer has to pay for management's failure in EACH TICKET they buy. You have not address this issue.
LAXintl wrote:AA namesGanesh Jayaram from John Deere as new CIO replacing Maya Leibman.
https://news.aa.com/news/news-details/2 ... fault.aspx
hhslax2 wrote:LAXintl wrote:AA namesGanesh Jayaram from John Deere as new CIO replacing Maya Leibman.
https://news.aa.com/news/news-details/2 ... fault.aspx
Does this mean they may have a working IT system in the next few years?
USAirKid wrote:hhslax2 wrote:LAXintl wrote:AA namesGanesh Jayaram from John Deere as new CIO replacing Maya Leibman.
https://news.aa.com/news/news-details/2 ... fault.aspx
Does this mean they may have a working IT system in the next few years?
Leibman led AA through a pretty smooth integration with US. There haven’t been any glaring IT issues.
So what IT issues are you complaint about?
bigb wrote:USAirKid wrote:hhslax2 wrote:
Does this mean they may have a working IT system in the next few years?
Leibman led AA through a pretty smooth integration with US. There haven’t been any glaring IT issues.
So what IT issues are you complaint about?
There is a lot that is left to be desired when it comes to AA IT….
USAirKid wrote:bigb wrote:USAirKid wrote:
Leibman led AA through a pretty smooth integration with US. There haven’t been any glaring IT issues.
So what IT issues are you complaint about?
There is a lot that is left to be desired when it comes to AA IT….
Vague assertions don't really help a discussion. What are three things that you'd change about AA's IT?
alasizon wrote:USAirKid wrote:bigb wrote:
There is a lot that is left to be desired when it comes to AA IT….
Vague assertions don't really help a discussion. What are three things that you'd change about AA's IT?
There are a lot of internal IT/system issues due to the constant changing of product owners but that really doesn't fall under the CIO side, the issues are primarily driven by the folks working on the customer experience side - IT is just building what they are told and it changes every 12 months.
USAirKid wrote:alasizon wrote:USAirKid wrote:
Vague assertions don't really help a discussion. What are three things that you'd change about AA's IT?
There are a lot of internal IT/system issues due to the constant changing of product owners but that really doesn't fall under the CIO side, the issues are primarily driven by the folks working on the customer experience side - IT is just building what they are told and it changes every 12 months.
Thank you for the detail. I think the spot where the CIO's office can be helpful is to properly guide product owners in what can and cannot be done and on what timeline. But that is the eternal struggle between IT and the product owners.
UPlog wrote:Byrdluvs747 wrote:I've been screaming for years that airlines need to hold very large sums of cash. Yet every time I got a lot of slick responses as to why airlines shouldnt. It seems odd that companies in such a capital intensive industry would have bare bones levels of cash on hand when black swan events have been popping up every 10 years.
You can scream all you want, but its a bad business practice to hoard cash. The company will find itself a takeover target funded by its own money and left in even worse shape.
USAirKid wrote:bigb wrote:USAirKid wrote:
Leibman led AA through a pretty smooth integration with US. There haven’t been any glaring IT issues.
So what IT issues are you complaint about?
There is a lot that is left to be desired when it comes to AA IT….
Vague assertions don't really help a discussion. What are three things that you'd change about AA's IT?
janders wrote:Seems to me, this move could have been signaled months ago, not announced with barely two 2-weeks notice.
And yes, that new title for Kerr seems like something made up fluff.
LAXintl wrote:AA prepaid $1.175 billion in outstanding term loans from 2016.
The term loans, which were due to mature in December 2023, were secured by slots and assets at NY LaGuardia and Washington DCA.
https://americanairlines.gcs-web.com/node/41081/html
Wonder if paying off these 12-months early has anything to do with rumored DOJ deal over NEA and Jetblue purchase of Spirit??
dfwfanboy wrote:LAXintl wrote:AA prepaid $1.175 billion in outstanding term loans from 2016.
The term loans, which were due to mature in December 2023, were secured by slots and assets at NY LaGuardia and Washington DCA.
https://americanairlines.gcs-web.com/node/41081/html
Wonder if paying off these 12-months early has anything to do with rumored DOJ deal over NEA and Jetblue purchase of Spirit??
What’s the rumor? Seems odd that doj would seek a “deal” before a ruling soon to come or that the NEA parties would agree to one if doj seems eager to get one shortly before a ruling. But I do get that both parties are known to mitigate risk before a ruling if both are nervous.
USAirKid wrote:dfwfanboy wrote:LAXintl wrote:AA prepaid $1.175 billion in outstanding term loans from 2016.
The term loans, which were due to mature in December 2023, were secured by slots and assets at NY LaGuardia and Washington DCA.
https://americanairlines.gcs-web.com/node/41081/html
Wonder if paying off these 12-months early has anything to do with rumored DOJ deal over NEA and Jetblue purchase of Spirit??
What’s the rumor? Seems odd that doj would seek a “deal” before a ruling soon to come or that the NEA parties would agree to one if doj seems eager to get one shortly before a ruling. But I do get that both parties are known to mitigate risk before a ruling if both are nervous.
It’s not uncommon in a lawsuit for opposing sides to continue to negotiate outside of the courtroom. Especially since everyone is reading the room in the courtroom. If your side looks like it’s going to lose, you’ll make a settlement offer that isn’t something you’d take going in, but is something perhaps better than a worst case scenario from a judge. On the opposing side, a negotiated settlement also provides certainty, and guarantees that you’re not going to be stuck in appeals.
The lawsuit is just the tip of the iceberg between opposing parties.