ssublyme
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Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 12:48 am

It seems alot of folks expect CH11 within the next 1yr. Who would be the biggest beneficiary of an AA bankruptcy. VX, WN etc? I think VX would take advantage of a ch11 and actually start building up DFW as a focus city of sorts.
 
goldenstate
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 12:49 am

Quoting ssublyme (Thread starter):
Who would be the biggest beneficiary of an AA bankruptcy.

Their bankruptcy attorneys.
 
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N62NA
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 12:51 am

Quoting ssublyme (Thread starter):
It seems alot of folks expect CH11 within the next 1yr. Who would be the biggest beneficiary of an AA bankruptcy. VX, WN etc? I think VX would take advantage of a ch11 and actually start building up DFW as a focus city of sorts.

I think you are confusing Chapter 11 bankruptcy with Chapter 7.

If AA files for bankruptcy, it's likely that operations will remain unaffected.
 
ssublyme
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 12:52 am

Quoting goldenstate (Reply 1):
Their bankruptcy attorneys.

lol, maybe I should further qualify by saying "Which airline"  
 
MAH4546
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 12:59 am

Nobody will benefit in terms of competitors other than a drop-off in bookings by consumers, a short-term, negligible affect,. It will actually hurt competitors in the long run, just like the previous run of filings has hurt AA - AA will come out stronger, leaner, more efficient and more competitive. An airline like Virgin America stands to lose a lot in the long-run if bankruptcy created a leaner, more efficient, lower cost AA.

Bankruptcy won't affect day-to-day operations and won't see any of the hubs closed. It will allow AA to more effectively grow in the future, just as DL and UA did.

[Edited 2011-09-29 18:03:48]
a.
 
delimit
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 1:01 am

Which airline?

AA.
 
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fxramper
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 1:41 am

Quoting ssublyme (Thread starter):

What are you talking about? Cause when DL filed they didn't quit flying out of ATL.   
 
wn700driver
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 2:04 am

Quoting MAH4546 (Reply 4):

Nobody will benefit in terms of competitors other than a drop-off in bookings by consumers, a short-term, negligible affect,. It will actually hurt competitors in the long run, just like the previous run of filings has hurt AA - AA will come out stronger, leaner, more efficient and more competitive. An airline like Virgin America stands to lose a lot in the long-run if bankruptcy created a leaner, more efficient, lower cost AA.

I don't know about VX coming to grief over this. I don't think they have a lot of market exposure where AA is dominant.

If AA does do a very short term, prepackaged BK that allows them to restructure their labor, maintain their new order, and renegotiate some other contracts, AND not get a case of merger mania upon their exit, then yes, I see none of their competition benefiting.

Most of the remaining legacies will have a new problem to deal with, as AA is sitting on a much better network than is generally credited. The rest of the LCCs out there would likely be unaffected. It would be interesting to see what becomes of the Eagle branded flying. I would think BK would change their contract & scope obligations to the point where we may see 175s & C9s start operating there, even after the divestiture.

All in all though, that likely won't happen this year or next. I think they have too much cash & not enough debt to qualify under the new rules. I guess they missed their opportunity to take the low road, unlike all other legacies...
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washingtonian
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 2:21 am

Quoting goldenstate (Reply 1):
Their bankruptcy attorneys.

Does anyone know what firm is representing American? I think it's a more-than-safe bet that they are already working with a law firm given that these things can take months to prepare.
 
comorin
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 2:23 am

Quoting delimit (Reply 5):
Which airline?

AA.

   no other reason to do it. The question is, what do you mean by AA?

The stakeholders in AA are:

Shareholders
Lenders
Vendors
Customers
Employees

On filing day, a trustee is appointed on behalf of the creditors and the shareholders hold near-worthless shares. The lenders are paid a fraction of what they are owed in order of debt seniority and claim on collateral.

If the company wants to continue operating, it will have to arrange for DIP (debtor-in-possesion) financing. This is working capital money necessary to run operations in order to preserve the value of the company. This money becomes the most senior of obligations and is not hard to obtain.

Customers and their FF miles should be protected, I think. Employees will have the benefit of job continuity, but under new terms.

Once the turnaround plan is implemented, a IPO for the new company is filed (I am not sure what happens to the old shares) - DAL folks please help out. The DIP financing gets repaid, and then the restructured debt.

So while new AA may have the same planes and people, it really is a new company with new shareholders.

More knowledgeable pros, please correct as needed.
 
avek00
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 2:31 am

A bankruptcy filing by AA in the near-term would be disastrous for the airline. Unlike 2002-2006, when the industry as a whole was far more fragmented, undercapitalized, and losing money hand over fist, AA would be trying to restructure amidst large, well-monied competitors who can and would wreak havoc throughout the bankruptcy process to preclude AA's succesful BK emergence.
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OzarkD9S
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 2:33 am

I'll bet the folks in Tempe would love to help AA come out of a Ch 11.
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nutsaboutplanes
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 2:44 am

Quoting OzarkD9S (Reply 11):
I'll bet the folks in Tempe would love to help AA come out of a Ch 11.

You sir, took my line!

No doubt about it. I can see this playing out.....who better to turn AMR into a profitable organization than Doug? AA needs to shake things up, they will need to bring in an outsider who does not recognize sacred cows and who has a track record of dealing with M and A.

Also, from 1986 to 1991, Parker was with AA in several financial management roles. I pulled his history from the Star Alliance website:

http://www.staralliance.com/en/about/airlines/management/doug-parker/

I see this happening if/ when AA files.....there is almost no doubt in my mind.
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einsteinboricua
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 2:57 am

Quoting OzarkD9S (Reply 11):
I'll bet the folks in Tempe would love to help AA come out of a Ch 11.

Hold on there. While we are all speculating that AA and US might tie the knot eventually, keep in mind that US also made a move on DL while under Ch11 (a merger, but it would still have indirectly led to emergence from bankruptcy protection) and DL rejected all offers. Who's to say AA will welcome US's offer to "aid" AA come out of Ch11? Wouldn't it make more sense to engage with them now before the otherwise inevitable happens?
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nutsaboutplanes
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 3:04 am

Quoting einsteinboricua (Reply 13):
Hold on there. While we are all speculating that AA and US might tie the knot eventually, keep in mind that US also made a move on DL while under Ch11 (a merger, but it would still have indirectly led to emergence from bankruptcy protection) and DL rejected all offers. Who's to say AA will welcome US's offer to "aid" AA come out of Ch11? Wouldn't it make more sense to engage with them now before the otherwise inevitable happens?

What a merger with US would offer to AA is the credibility to secure DIP/ exit financing.......this is not F9.....this will be a huge sum of money at risk and it wont be as available as it was for UA, DL or NW when they filed years ago. The economy and the tight lending markets will make this much more difficult.

Having a guy at the helm who has done this before will bring credibility to AA as they try to convince potential lenders that the risk of investing in AA is reasonable and not a lost cause. There is no doubt a tough road ahead.
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nutsaboutplanes
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 3:16 am

Quoting einsteinboricua (Reply 13):
Wouldn't it make more sense to engage with them now before the otherwise inevitable happens?

I forgot to answer this in the previous post. I think that AA needs to get the real dirty work done first.....labor contracts. Once these have been stabilized and brought in-line with industry averages, then AA can make the case to its investors that it is ready to emerge and compete (yes I know that labor is not the only issue here). At that point, a merger makes more sense.

Announcing the merger before the tough work of negotiating the labor contracts in Bankruptcy takes the focus off of the true structural issues at AA.........the unions would be focused on the merger and panic would make fruitful negotiations virtually impossible. AA would tail spin, morale would plummet and ship would break apart at the seems.

I think an interim leadership team will be installed at AA to navigate the organization through the toughest parts of BK (lawyers) and then a permanent management team will take root at a later point when the turmoil of the actual BK process has simmered down.

This is always how I saw Doug Steenland at NW.....he was there for one reason and one reason only.

[Edited 2011-09-29 20:18:12]
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goldenstate
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 3:32 am

Quoting comorin (Reply 9):
Once the turnaround plan is implemented, a IPO for the new company is filed (I am not sure what happens to the old shares) - DAL folks please help out. The DIP financing gets repaid, and then the restructured debt.

So while new AA may have the same planes and people, it really is a new company with new shareholders.

The old shares are worthless both financially and legally. New shares are distributed to claimholders and possibly to employees--DAL management insisted on an equity stake for the frontline employees--that pissed off a lot of creditors.

In DAL's case, the DIP facility was repaid by issuing debt upon emergence from bankruptcy. Obviously, that debt is rather expensive. DAL's exit facility was retired earlier this year. DIP financing is not necessary if the debtor's business has enough prepetition cash available to sustain operations through the filing. I believe NWA did not seek DIP financing.

Quoting Nutsaboutplanes (Reply 12):
who better to turn AMR into a profitable organization than Doug?

At least 10 names come immediately to mind. With a few more minutes, I could probably list another 20.

Clearly bankruptcy is not well understood by most of the people here who so casually say that AA should "just get it overwith" or do a "quick, prepackaged" trip to the court. Sounds as easy as taking out the trash. Anybody with actual experience in a bankruptcy restructuring or the many years it takes to recover from one knows better.
 
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 3:34 am

The day we see AA not flying in our skies, is the day the world comes to an end (December 21, 2012). Seriously, AA is hurting, but so are a ton of airlines right now. This industry is full of these cycles of ups and downs. AA will figure out how to pull out of this, and I would not be surprised if they avoid Chapter 11 in that process. If they did go into Chapter 11, they would come out of it just fine.

It amazes me how many a.netter vultures frequent these thoughts of airline failures. I remember when US Airways went chapter 11, everyone wrote them off. Or when UA went Chapter 11, how quick so many painted a picture of a failed airline. Oh, and Delta... The never ending cycle.
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avek00
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 3:57 am

Quoting F9Animal (Reply 17):
Seriously, AA is hurting, but so are a ton of airlines right now.

In the USA aviation market, the other major legacies and Southwest are OK, and all of them are in a financial position to turn an AMR bankruptcy into a nightmare in a way the industry could not wreak havoc during the UAL, DAL, and NWA bankruptcies several years back.
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nutsaboutplanes
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 4:03 am

Quoting goldenstate (Reply 16):
At least 10 names come immediately to mind. With a few more minutes, I could probably list another 20.

You forgot to include the list in your post. 
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 4:11 am

Quoting Nutsaboutplanes (Reply 19):
You forgot to include the list in your post.

It's probably imaginary.

Usually the only people who deny Parker could pull off a turnaround are those who simply have something against him and/or US in general.

US was in far, far worse shape than AA is now, and also lacked the positive reputation that AA by and large enjoys. Everyone hated US and couldn't see them liquidate fast enough. Now, US is profitable and has seen service and productivity levels skyrocket since the merger. There are plenty of arguments to the contrary and they are all baseless in face of the numbers.
 
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 6:54 am

This seems extremely unlikely to me. Maybe chapter 11 but that wouldn't really benefit too much or change things in the big picture.

Lets assume something crazy I would think the hubs would be fought for hard. AA has some of the best hubs. DFW and MIA are fortress hubs. Someone would roll into both of those i am sure. Frontier would love to fly out of either DEN or MKE im sure into one of those fortress hubs that might actually be able to produce money. If one of those were to open up the problem they would have is getting the cash to move but if a golden opportunity arose they would be able get it. US could surely use a hub more in the center of the country so DFW would easily be worth a 30% slim down at PHL, PHX, and CLT to make a true hub there. MIA and DFW would be replaced quickly. The other cities are already hubs (LAX-UA), (ORD-UA), (JFK-B6, DL) so i think they would see those airlines just grow stronger.

If DFW opened with tons of gates and no hub for competition i cant see F9, B6, and US all not wanting to race into there but WN even would have to consider a move from Love field if a once in a lifetime opportunity were to open up like that. They could truly rule Dallas. WN is smart LUV is perfect because AA is in DFW but if some crazy not gonna happen scenario DFW had no hub they would have to consider a move they are a Dallas Airline.
 
kfitz
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 7:34 am

these threads are a hallmark of A.net. They come around and are an outlet for hometeam quarterbacks to get their passes in. I can't tell you how many times I've listened to the CO vultures lick their chops over UA's "inevitable" liquidation back in the 2005-era years, how many times the DL fans wished for a liquidated US, to 'get back at Doug'. Along with US, UA, DL, NW - you actively had people parading around advocating liquidation so "their" airline could buy everything at a fire sale. Nothing more than a slightly amusing sideshow, sort of like all the constant cable news focus on "dreamteam" tickets and the like - in no way indicative of reality, but hey, sure a fun game to play!
 
nutsaboutplanes
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 8:17 am

Quoting kfitz (Reply 22):
Along with US, UA, DL, NW - you actively had people parading around advocating liquidation so "their" airline could buy everything at a fire sale. Nothing more than a slightly amusing sideshow, sort of like all the constant cable news focus on "dreamteam" tickets and the like - in no way indicative of reality, but hey, sure a fun game to play!

While this has been true of the last several situations involving M and A activity in the airline business, it wasn't that long ago that airlines were "parted out" and carved up like the Thanksgiving turkey. There have been several carriers that ended up completely defunct with assets sold off at fire sale prices including Braniff and Eastern......both of these were at some point considered completely improbable to fail.

In the 60's and 70's, who would have thought that Pan Am would end up where it ultimately did........now only a soap opera like TV show on a TV network. Its legacy lives on at DL,UA and AA who picked up the assets/ routes during post-shutdown asset sales and court ordered auctions.

So again, while the last several mergers have been "civilized"....it really was not all that long ago that corporate break-ups and asset sales were a part of the airline business...........there is nothing keeping it from happening again.
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jfk777
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 11:04 am

IF AA were to go chapter 11, different airlines would pick up the desirable parts. Those are the MIA & DFW hubs, LHR slots, NRT slots, ORD slots and JFK terminal.

MIA would probably end up in Delta's hands since they have a larger Florida presence then UA. USairways would love to get the DFW & NRT routes since both DL & UA have NRT flights already. United would try to get as many ORD slots bit the DOT would spread them around to others too. AA's LHR slots wold probably be divided among US, DL and UA so each could increase their flights to that important airport, just don't see a scenario where DL or Usair buys 17 slots to LHR.
 
VgnAtl747
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 12:13 pm

Ch11 doesn't mean liquidation, so I don't think this post has much of a point. Almost all of the majors have been under Ch11 at some point, the biggest beneficiary would be AA itself (assuming they actually fix their problems). That said, they've been ignoring their issues for years so I have my doubts that Ch11 will be the magic pill that suddenly fixes everything. What AA needs is a Ch11 filing to get their debt in order and fix the labor issues, and to drive a big bus up to the management building and drive all of the senior leadership away to a far away deserted place and leave them there.

As much as people blame the labor issues for everything at AA, there's no excuse for gross mismanagement. They can't keep beating to their own drum (that has been playing the same tune since the 90's); this is a different world, and in my view AA's weakness has been the inability to adapt to the current economy and competition.
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einsteinboricua
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 12:19 pm

Quoting Nutsaboutplanes (Reply 15):
Announcing the merger before the tough work of negotiating the labor contracts in Bankruptcy takes the focus off of the true structural issues at AA.........the unions would be focused on the merger and panic would make fruitful negotiations virtually impossible. AA would tail spin, morale would plummet and ship would break apart at the seems.

But you don't HAVE to announce a merger. You can start by having closer cooperation with each other. Of course, that would mean that either AA leaves oneworld (doubtful) or US leaves Star (most likely). After a bit of time of dating, announce the engagement as well.

Obviously, both airlines have labor issues which, until sorted out, will not allow any big changes to happen.
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 12:24 pm

Quoting comorin (Reply 9):
If the company wants to continue operating, it will have to arrange for DIP (debtor-in-possesion) financing. This is working capital money necessary to run operations in order to preserve the value of the company. This money becomes the most senior of obligations and is not hard to obtain.

Debtor-in-possession is done with. AA will have to arrange all financing before filing for bankruptcy. Creditor-in-possession is the new way they do bankruptcy and requires AA to cover all current costs + the cost of the bankruptcy.

...this was changed when the BK laws were updated to try and protect the company's debtors.
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aajfksjubklyn
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 12:35 pm

If anyone on here really thinks AA will file for anything, or go belly up you are falling for what AA wants. Doesn't anyone realize that AA wants and is trying desperately to rid themselves of high paying senior employees and are scaring them into leaving NOW as opposed to later. An environment is being created to rid the airline of senior workforce who never leave, if the threat or slightest insecurities threaten the ability of a senior employee to receive their pensions, they are more willing to leave now rather than later. This is what they want. I dont disagree in many regards.

Look at the BIG picture: Senior flight attendants will not want to get certified on the newer single aisle aircraft (they simply dont like them)-more new single aisle aircraft-the less options for them to bid (as in the case of the very senior transcon's).

-Create a more positive outlook of a bankruptcy filing: Employees will leave to guarantee something of a pension-regardless of what happens post bankruptcy.

-Another one I see coming at AA, require ALL flight Attendants to be qualified on ALL aircraft (currently you can select and choose which one you fly). If this is done, many will say take the job and shove it.

My two cents.
 
Byrdluvs747
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 12:47 pm

The biggest benefactor of a AA chapter 11 bankruptcy would be AA then Eagle.

Quoting aajfksjubklyn (Reply 28):
Doesn't anyone realize that AA wants and is trying desperately to rid themselves of high paying senior employees and are scaring them into leaving NOW as opposed to later.

It isn't the higher paid employees that are killing AA. It's the work rules for all employees. Having higher paid employees leave does nothing for the AA in the long run. The only thing that will result is junior staff moving into those slots under the same costly contract. The contracts are the key to AA's future, and it only will only be resolved in bankruptcy.

Quoting aajfksjubklyn (Reply 28):
require ALL flight Attendants to be qualified on ALL aircraft (currently you can select and choose which one you fly). If this is done, many will say take the job and shove it.

Not if their contract says otherwise. AA can't just impose something that goes against the agreement between AA and the unions.
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washingtonian
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 12:55 pm

Does AA really have more senior F/As and pilots than any other major airline?
 
goldenstate
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 1:06 pm

Quoting HPRamper (Reply 20):
It's probably imaginary.

Usually the only people who deny Parker could pull off a turnaround are those who simply have something against him and/or US in general.

It would not be appropriate to throw out names in a public setting, but I will say this: the only thing imaginary is the idea that Parker can work positively and build mutual trust with organized labor. That is AA's most immediate and pressing need, and he would come in with heavy baggage from US/HP.

Further, we can debate the definition of a "turnaround," but I think it is worth noting that in both the HP/US merger and the failed US/DL hostile takeover attempt, Mr. Parker entered the picture only after other executive teams had completed most of the difficult cost cutting and restructring processes in their respective bankruptcies. I don't begrudge him that one bit; it's smart business and good strategy. But when you talk about him executing a turnaround/merger at AA, it's not clear to me what body of work you are citing to support that.

AA is absolutely better off without US than with, but in a bankruptcy AA and its employees will forfeit the right to make their own decisions and control their own destiny. In the current industry climate and with assets as attractive as AA's, that is not a good situation to be in.
 
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 1:09 pm

Quoting Byrdluvs747 (Reply 29):
Not if their contract says otherwise. AA can't just impose something that goes against the agreement between AA and the unions.

It can be put on the table though...
 
tommy767
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 1:40 pm

I'd love to see the hub network of AA/US come to life: PHX, DFW, CLT, MIA, ORD, PHL, DCA, and JFK (put would probably have to get rid of DCA, PHL, or JFK to make it work.)
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comorin
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 1:56 pm

Quoting goldenstate (Reply 16):

Do prior shareholders get any portion at all of new shares?

Quoting 0NEWAIR0 (Reply 27):
Quoting comorin (Reply 9):
If the company wants to continue operating, it will have to arrange for DIP (debtor-in-possesion) financing. This is working capital money necessary to run operations in order to preserve the value of the company. This money becomes the most senior of obligations and is not hard to obtain.

Debtor-in-possession is done with. AA will have to arrange all financing before filing for bankruptcy. Creditor-in-possession is the new way they do bankruptcy and requires AA to cover all current costs + the cost of the bankruptcy.

...this was changed when the BK laws were updated to try and protect the company's debtors.

Thank you for the update!
 
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lightsaber
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 1:59 pm

Quoting 0NEWAIR0 (Reply 27):
Debtor-in-possession is done with. AA will have to arrange all financing before filing for bankruptcy. Creditor-in-possession is the new way they do bankruptcy and requires AA to cover all current costs + the cost of the bankruptcy.

Which is why, I speculate, that AA is borrowing like mad. AA is burning through cash so quickly they will have to enter bankruptcy a year earlier than I was initially speculating. A prepackaged reorganizational bankruptcy. If AA enters with too little cash, they are done. For the sake of everyone (except the shareholders), I hope it happens earlier rather than later.

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copa330200
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 2:48 pm

not sure who will be the Biggest Beneficiary but I know this will very hard / sad for all the employees !!!!  
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BC77008
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 2:51 pm

If there was a drinking game for every time this subject came up, we would all literally be in AA right now (and I'm talking about the support group for alcoholics, NOT the airline!)
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etops1
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 4:27 pm

Biggest Beneficiary of an AA Bankruptcy?? .............****USAIRWAYS****
 
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 4:40 pm

It was twenty or so years ago, but when a bank in the family for over a century was seized the existing stockholders did not so much as receive a letter from any of the officials involved. It was as though they no longer existed. Which they didn't, as least as owners anymore.
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Ruscoe
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RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 4:44 pm

if Ch 11
The answer is AMERICAN AIRLINES

Ruscoe
 
oflanigan
Posts: 196
Joined: Sat Dec 27, 2008 3:22 am

RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 4:54 pm

Quoting Ruscoe (Reply 40):
if Ch 11
The answer is AMERICAN AIRLINES

I agree. If Chapter 7 of course US Airways.
 
avek00
Posts: 3228
Joined: Mon Oct 25, 2004 5:56 am

RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 4:57 pm

Quoting goldenstate (Reply 31):
Further, we can debate the definition of a "turnaround," but I think it is worth noting that in both the HP/US merger and the failed US/DL hostile takeover attempt, Mr. Parker entered the picture only after other executive teams had completed most of the difficult cost cutting and restructring processes in their respective bankruptcies. I don't begrudge him that one bit; it's smart business and good strategy. But when you talk about him executing a turnaround/merger at AA, it's not clear to me what body of work you are citing to support that.

The current US Airways is not a success story - it's more like a failure that is failing less these days. Pre-merger US used to maintain a solid revenue premium relative to competing carriers, and now operates with a ~12% revenue gap compared to its legacy peers. It's solid domination of key East Coast airports has been whittled away to a point that the airline faces stiff competition at every key city in its network except Charlotte. The double-barbell hub approach proved to be a joke, and while US is now starting to bing its longhaul product back up to industry standards, for many years its offerings on TATL flights was a joke that ensured US bottom-of-the-barrel and stay-out-of-our-JV status in the TATL marketplace.

And you want Parker to have an opportunity to eff up the few things American still does well? Ay dios mio!
Live life to the fullest.
 
goldenstate
Posts: 155
Joined: Thu Feb 04, 2010 11:24 pm

RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 4:58 pm

Quoting comorin (Reply 34):
Do prior shareholders get any portion at all of new shares?

Generally speaking, no. Distributions and claim priority are a complex issue and almost always the subject of fighting both within creditor classes as well as between creditors, debtors, and equity holders. The reorganized corporation is almost never valuable enough to fully repay creditor claims through distributions of cash and/or equity. As such, creditors are unlikely to approve a plan of reorganization that provides any distribution to prepetition equity holders when the creditors themselves are impaired--that is, paid less than the full value of their claim.

Quoting lightsaber (Reply 35):
Which is why, I speculate, that AA is borrowing like mad. AA is burning through cash so quickly they will have to enter bankruptcy a year earlier than I was initially speculating.
AA is not burning through cash or leveraging assets to fund cash-negative operations--an important distinction. Their cash depletion and need for borrowing are driven by undisciplined capex (nearly $1 billion in the first two quarters of 2011 alone) and rolling over existing long term debt--that is, issuing new debt to fund the repayment of maturing debt obligations.

Quoting lightsaber (Reply 35):
A prepackaged reorganizational bankruptcy.

A prepackaged bankruptcy requires all potential claimholders to reach agreement beforehand in order to shorten the period of time spent in Chapter 11. This will include labor cost reductions and productivity improvements from the unions. If any management team can secure deals with the unions within the next six months, the primary obstacle to an out of court restructuring is cleared. Management should be able to rein in capex and leverage sustainable labor agreements to drive revenue momentum through network and product improvements.

While a prepack saves time and expense spent under court protection, it takes significant time to negotiate terms with creditors before filing and does not shield the debtors from outside interference. As word spreads of pre-filing negotiations, other parties not directly involved in debtor-creditor pre-filing negotiations are likely to acquire the distressed debt from other creditors in order to obtain control of the restructured company either through a prepack or by forcing a traditional bankruptcy filing.

Quoting lightsaber (Reply 35):
For the sake of everyone (except the shareholders), I hope it happens earlier rather than later.

All parties, other than bankruptcy counsel, are best served by an out of court process. More jobs are preserved, less capital is destroyed, and more claims are recovered when restructuring efforts take place out of court. The Airliners.net conventional wisdom about Chapter 11 is vastly disconnected from reality, most likely because very few here have direct experience in a Chapter 11 restructuring and its aftermath. It's an unpleasant experience for everyone involved, which is why it is generally viewed as an option of last resort.

[Edited 2011-09-30 10:22:24]
 
HPRamper
Posts: 4987
Joined: Sat May 14, 2005 4:22 am

RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 6:40 pm

Quoting avek00 (Reply 42):
The current US Airways is not a success story - it's more like a failure that is failing less these days. Pre-merger US used to maintain a solid revenue premium relative to competing carriers, and now operates with a ~12% revenue gap compared to its legacy peers.

Pre-merger US was also bleeding money like a stuck pig.

Quoting avek00 (Reply 42):
It's solid domination of key East Coast airports has been whittled away to a point that the airline faces stiff competition at every key city in its network except Charlotte.

Most of that whittling was also pre-merger (BWI etc). The cuts post-merger are a result of the management seeing the importance of profitable flying versus pure market share, something AA might take into consideration. And last I checked, US still dominates PHL as well as CLT.

Quoting avek00 (Reply 42):
The double-barbell hub approach proved to be a joke

Not exactly sure what you mean by that. LAS-PHX and PHL-PIT? Post-merger both PIT and LAS were pulled down, albeit years apart.

Quoting avek00 (Reply 42):
for many years its offerings on TATL flights was a joke that ensured US bottom-of-the-barrel and stay-out-of-our-JV status in the TATL marketplace.

For many years? The merger wasn't that long ago. It seems that you are basing your observations mostly on PMUS, something that Parker and Co. had almost nothing to do with.
 
apodino
Posts: 3641
Joined: Mon Apr 04, 2005 2:11 am

RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 7:09 pm

Quoting HPRamper (Reply 44):

Most of that whittling was also pre-merger (BWI etc). The cuts post-merger are a result of the management seeing the importance of profitable flying versus pure market share, something AA might take into consideration. And last I checked, US still dominates PHL as well as CLT.

PHL has gotten to the point where competitors are pulling flights because they can't compete with US in PHL. Classic example here is WN.

Quoting goldenstate (Reply 31):

It would not be appropriate to throw out names in a public setting, but I will say this: the only thing imaginary is the idea that Parker can work positively and build mutual trust with organized labor. That is AA's most immediate and pressing need, and he would come in with heavy baggage from US/HP.

Whether or not he is responsible for much of the labor disputes at US can be debated. That being said, just the perception of what is going on at US will be enough for people to question him coming to AA. The one thing though that worries me is that years ago, TWA could have brought in Frank Lorenzo and everyone opposed it because of what he had done elsewhere. The problem was that instead they got Carl Ichan, who arguably turned out to be even worse than Lorenzo would have been. I don't want to see this play out at AA.

Quoting aajfksjubklyn (Reply 28):
If anyone on here really thinks AA will file for anything, or go belly up you are falling for what AA wants. Doesn't anyone realize that AA wants and is trying desperately to rid themselves of high paying senior employees and are scaring them into leaving NOW as opposed to later. An environment is being created to rid the airline of senior workforce who never leave, if the threat or slightest insecurities threaten the ability of a senior employee to receive their pensions, they are more willing to leave now rather than later. This is what they want. I dont disagree in many regards.

Look at the BIG picture: Senior flight attendants will not want to get certified on the newer single aisle aircraft (they simply dont like them)-more new single aisle aircraft-the less options for them to bid (as in the case of the very senior transcon's).

-Create a more positive outlook of a bankruptcy filing: Employees will leave to guarantee something of a pension-regardless of what happens post bankruptcy.

-Another one I see coming at AA, require ALL flight Attendants to be qualified on ALL aircraft (currently you can select and choose which one you fly). If this is done, many will say take the job and shove it.

I believe there are more positive ways to compel senior people to retire. Delta offered an early retirement package for example prior to their merger, and got a lot of people to take it. Scaring people into retirement doesn't seem like a positive way to do it, because the unseen consequence is for the people who are not ready to retire you create an environment where employees worry, rather than stay positive, This rubs off on people, and it has a way to creep down to the passengers as well.

I also am shocked that AA has a union contract that doesn't require their FA's to be qualified on every aircraft. This is a concession that I hope AA actually wins in a new contract with their flight attendants, because this just creates too many ineffeciencies that will keep AA at a serious disadvantage with their competitors. It is stuff like these types of rules, and not payrates, that create many of the high labor costs at AA (Not saying pay isn't an issue, but workrules are always overlooked)
 
User avatar
thebatman
Posts: 848
Joined: Sun Aug 05, 2007 12:15 am

RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 8:57 pm

Quoting ssublyme (Thread starter):
Who would be the biggest beneficiary of an AA bankruptcy?

AA management. Granted, things are a bit different now, and an AA chap.11 filing would send the other airlines after them like wolves on a fresh kill. However, some routes may go to airline A and other routes to airline B, but one thing is for sure: there will only be one "winner" - AA management. They will use the same scare tactics as the others to get concession after concession. All in the name of survival. So they can emerge "leaner and meaner". I fear for the AA employees, because they will most certainly take it in the shorts. And, after all is said and done, the management team will end up splitting a $100 million-or-so bonus for "guiding them through the storm". If you haven't guessed by now, I'm speaking from experience...
Aircraft mechanics - because pilots need heroes too!
 
XT6Wagon
Posts: 2726
Joined: Tue Feb 13, 2007 4:06 pm

RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 9:10 pm

Quoting THEBATMAN (Reply 46):
I fear for the AA employees, because they will most certainly take it in the shorts

AA's problem with its labor groups isn't how much they pay, but rather that AA employees provide very little productivity for thier pay. Also they used to threaten strikes or other "actions" if the wrong brand of toiletpaper was in the john, much less more meaningful disputes. AA doesn't need to cut thier workers pay. They simply need to get all the dead weight gone and have everyone left start putting in some real work. This isn't some anti-union rant, this is in comparison to the employee's at other airlines working the same jobs. Maybe if AA employees wish to earn WN pay rates, they should be working to provide the same productivity as WN employees.
 
User avatar
N62NA
Posts: 4433
Joined: Sun Aug 10, 2003 1:05 am

RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 9:16 pm

Quoting THEBATMAN (Reply 46):
an AA chap.11 filing would send the other airlines after them like wolves on a fresh kill.

I don't follow this line of thinking. It's Chapter 11, not Chapter 7 (liquidation).
 
displane
Posts: 50
Joined: Fri May 27, 2005 8:50 am

RE: Biggest Beneficiary Of A AA Bankruptcy

Fri Sep 30, 2011 9:33 pm

Quoting OzarkD9S (Reply 11):
I'll bet the folks in Tempe would love to help AA come out of a Ch 11.

I was on a US Air flt. from LAS to PHX yesterday and even though I was half asleep, that would explain what the FA's were talking about in the rear galley. They were talking about fleet orders with American and US Air and then there would be some whispering. Guess they heard a rumor.

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