flyby519
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RE: AA/AMR Market Cap Now Below $1B

Tue Oct 04, 2011 11:45 pm

Why does AA apparently need to merge with B6 to get a benefit from their success?

Is it possible to create a relationship like AA+BA have except on a domestic AA+B6 level? Complete anti-trust immunity, allowing AA/B6 to coordinate schedules/fares/revenue/etc. B6 keeps its low cost structure, gains serious pax traffic from AA in areas where AA cant compete effectively (BOS, FLL, JFK)

For the west coast strategy they could throw VX in the mix (or maybe B6/VX operational merger and the combined company would be an AA anti-trust immunity partner)
 
commavia
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 12:00 am

Quoting flyby519 (Reply 100):
Why does AA apparently need to merge with B6 to get a benefit from their success?

AA doesn't "need" to merge with JetBlue. I think the point some of us were making mas merely that there are aspects of such a combination that do, indeed, seem to have some economic, network and strategic sense to them.

Quoting flyby519 (Reply 100):
Is it possible to create a relationship like AA+BA have except on a domestic AA+B6 level? Complete anti-trust immunity, allowing AA/B6 to coordinate schedules/fares/revenue/etc. B6 keeps its low cost structure, gains serious pax traffic from AA in areas where AA cant compete effectively (BOS, FLL, JFK)

The AA unions would never go for that. Some of the unions would rather AA didn't codeshare at all, period, and they certainly wouldn't go for AA having antitrust immunity with another mainline U.S. carrier that isn't owned by AA and whose employees aren't also part of the AA unions.
 
jacobin777
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 12:50 am

AA's labor problem just isn't direct pay. Its also productivity. AA is the lowest amongst its competitors.

Also, AA has a pension payment problem which the legacies were able to shed during BK. That is IMHO actually AA's largest labor problem.

If AA can shed its current pension obligation scheme and get productivity + scope clauses improved, it can keep its current pay/salary and still be very competitive and profitable.

I don't think the unions are willing to go for this however since as ikramerica has stated, they don't want to believe in the "new normal".
"Up the Irons!"
 
flymia
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 1:18 am

Quoting Jacobin777 (Reply 102):
AA's labor problem just isn't direct pay. Its also productivity. AA is the lowest amongst its competitors.

Also, AA has a pension payment problem which the legacies were able to shed during BK. That is IMHO actually AA's largest labor problem.

If AA can shed its current pension obligation scheme and get productivity + scope clauses improved, it can keep its current pay/salary and still be very competitive and profitable.

I don't think the unions are willing to go for this however since as ikramerica has stated, they don't want to believe in the "new normal".

Exactly, I think two main things got AA into this mess. One they have yet to go Chap 11 which really has put them at a disadvantage to the other large legacy airlines UA, DL, US. The unions have killed AA. They are a prime example on how unions dont work, they really hurt companies in the long run and in other area governments and the economy.

They need to get labor cost down and the MD-80s out. There is another thread that says who would be the biggest beneficiary if AA went Chapter 11 and I honestly think it would be AA themselves.
"It was just four of us on the flight deck, trying to do our job" (Captain Al Haynes)
 
frmrCapCadet
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 1:50 am

I can't imagine stockholders of either Alaska or JetBlue every agreeing to a buyout. I could imagine either buying some of the bits and pieces of American.
Buffet: the airline business...has eaten up capital...like..no other (business)
 
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calpsafltskeds
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 3:59 am

I've read most of the comments and scanned the thread for mention of their FF plan. If we agree that AA will shrink and MD80s and 762s will go away, the question is where they will cut without eroding their FF base. AA heavily counts on big city Transcon and service to LHR and other larger European cities.

Unless AA really cuts ORD, I guess AA could downgrade much service at their fortress hub of DFW to RJs so they could pull mainline aircraft - ORD may be difficult as my guess is AA is way behind UA in seats and frequency on most ORD markets. Looking at the ORD timetable, you can go pages without seeing very many AA mainline aircraft.

As for the cornerstone strategy, my guess is they would maintain each market in this order . MIA, NYC, DFW, ORD, LAX.

IMHO LAX looks on the edge as most of the markets are very competitive with AA's offerings being inferior, especially where RJs are up against hub-to-hub services of UA, DL and frequency of WN. Would AA pull, reduce or downgrade at least some of these mainline routes? LAX-AUS, LAS, BNA, EWR, MCO, SFO, SJD, YYZ, IAD? If some of those routes are reduced/eliminated, then does the FF base crumble, leading to canceling of RJ flying in competitive markets? LAX-IAH, DEN, PHX, RNO, SMF, SLC, SAN. SJC?
 
HPRamper
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 4:27 am

I don't think AA can feasibly cut ORD to an O&D hub like LAX unless they can shift a majority of ops from LGA to JFK with the obvious connotations.

Without ORD in the picture to connect at, pax in the Northeast will need to connect elsewhere and an expanded JFK fits the bill. DFW is just too far out of the way for many routings.
 
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lightsaber
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 4:38 am

Quoting United1 (Reply 98):
Quoting ckfred (Reply 93):
Also, the MD-80s are bought and paid for. They are only a drain on AA in terms of fuel consumption.

Actually they are not paid for they are mortgaged up the hilt....

AA's debt is an issue. Leveraged MD-80s are just a bad idea...   

Quoting Jacobin777 (Reply 102):
AA's labor problem just isn't direct pay. Its also productivity. AA is the lowest amongst its competitors.

  

Currently limited to 78 flying hours per month (non-voluntary), limited to 83 hours if a pilot 'volunteers'.
http://aviationblog.dallasnews.com/

The rapid retirements are not helping with limited crew flexibility.

Lightsaber
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masseybrown
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 4:54 am

Quoting flyby519 (Reply 100):
Why does AA apparently need to merge with B6 to get a benefit from their success?

Interesting aside: Lufthansa, on the corporate organization page of their website, lists Jet Blue as a member of the Lufthansa 'Airline Group'.

http://konzern.lufthansa.com/en/busi...ments/passenger-airline-group.html

LH owns 19 percent of B6. By buying one percent more, LH could effectively block any B6 merger they don't like. An owner of 20% generally has the option of demanding cash (not stock or debt) in a merger. I doubt very many acquirers would want to cash out LH as part of a change of control.

The WSJ said today that Arpey has reiterated his opposition to a pre-packaged Chapter 11. I'm not sure why. What is there left to lose? I have to guess he can't structure a pre-pack deal to his liking.
 
goldenstate
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 2:37 pm

Quoting United1 (Reply 98):
Actually they are not paid for they are mortgaged up the hilt....
Quoting lightsaber (Reply 107):
Leveraged MD-80s are just a bad idea...

Well, some of them are. They've been steadily putting the 80s into sale-leaseback transactions, so technically the asset comes off the balance sheet and an off-balance sheet operating lease obligation is incurred. Given AMR's short term financial issues, that's probably the best way to handle a fleet that is clearly on its way out the door. They take a noncash loss on the asset sale and enter into a lease with significant risk premiums attached to it, but they get immediate cash and they don't care about owning the asset at the end of the lease term.

AMR's EETC offerings over the last 2 years (and probably further back, I just haven't looked) have involved 777/757/738 fleets. MD80s are not attractive as collateral for secured debt instruments; they are obsolete and not easily remarketed. In a potential bankruptcy, AMR could attempt to reject the operating leases for 100+ MD-80s while affirming their 738 leases and fully honoring the debt instruments for which the more modern fleets are pledged as collateral. That is essentially what DAL did.

Quoting Jacobin777 (Reply 102):
Also, AA has a pension payment problem which the legacies were able to shed during BK. That is IMHO actually AA's largest labor problem.

If AA can shed its current pension obligation scheme and get productivity + scope clauses improved, it can keep its current pay/salary and still be very competitive and profitable.

These statements are slightly misleading. While it is true that UAL and US terminated substantially all of their defined benefit pensions and turned them over to the PBGC, UAL has now inherited CO's defined benefit plan liability. DAL chose to terminate only its pilot pension and today continues to administer and contribute to the frozen PMDL nonpilot and PMNW pensions.

From the 2010 10K filings, long term pension benefit liability:
AMR $7.8B, or about 35.3% of annual revenues
DAL $11.5B, or about 36.2% of annual revenues

Furthermore, the Pension Protection Act of 2006 reaffirmed and substantially increased the defined benefit pension termination premiums due to the PBGC from air carriers, in exchange for more flexible funding and freezing rules which allow air carriers to address long term pension issues without having to resort to a bankruptcy filing, and as a response to US Airways' attempts to get out of paying the pension termination premiums following their plan terminations.

By simply freezing the defined benefit pension, AMR would both decrease the amount of their pension benefit liability and be granted a more generous timetable in which to fully fund it.

If AMR terminated all of their pension plans with financial distress as their justification, they could be liable for as much as $700M in termination premiums over three years, based on some reasonably conservative assumptions. This would be in addition to the bankruptcy claim and future earnings triggers for further cash payments that the PBGC would insist on as well. The former dilutes creditor recovery in a bankruptcy, the latter burdens the balance sheet with debt when AMR makes money in the future.

Pension termination, like everything else in bankruptcy, is not a panacea.
 
commavia
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 2:45 pm

Quoting goldenstate (Reply 109):
By simply freezing the defined benefit pension, AMR would both decrease the amount of their pension benefit liability and be granted a more generous timetable in which to fully fund it.

If AMR terminated all of their pension plans with financial distress as their justification, they could be liable for as much as $700M in termination premiums over three years, based on some reasonably conservative assumptions. This would be in addition to the bankruptcy claim and future earnings triggers for further cash payments that the PBGC would insist on as well. The former dilutes creditor recovery in a bankruptcy, the latter burdens the balance sheet with debt when AMR makes money in the future.

Pension termination, like everything else in bankruptcy, is not a panacea.

Very true. I suspect that AMR would be more interested in freezing their pension plans, and simply continuing to contribute to future payout liabilities as they stand today, rather than dumping them altogether. As you say, that seems to be the way several other bankrupt carriers went as well.

But, that being said, I don't see the pension as AA's biggest issue with the labor contracts. Far more pressing is productivity, and beyond that, I actually think the single biggest issue AA needs to address is flexibility. That's where the pilot contract, especially, comes in. AA needs the ability to rapidly adapt to evolving market dynamics in new ways that at the moment are challenging with the current pilot contract. Two that come to mind immediately are more flexibility to do economical longhaul flying, and - critically - a desperate need for economical 90-seaters.

I suspect that AA is raising precisely those issues with the APA right now, and I think - hope - the two sides can agree on something sensible that benefits both sides. As I have long argued, I think the company and the union could and should agree on a veritable "grand bargain" where the APA agrees to relatively lower pay scales more competitive with where small jet (
 
mogandoCI
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 2:48 pm

Quoting commavia (Reply 97):
all by three (ORD-LGA, MIA-LGA, LAX-SAN) are in/out of DFW, where that frequency likely is justified

first 2, yes

LAX-SAN is a 2 hour drive and that justifies >10x daily ? Everyone on that flight would simply be connecting. That 10x would be better sent to DFW than LAX.
 
norcal
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 3:06 pm

Quoting commavia (Reply 110):
That's where the pilot contract, especially, comes in. AA needs the ability to rapidly adapt to evolving market dynamics in new ways that at the moment are challenging with the current pilot contract. Two that come to mind immediately are more flexibility to do economical longhaul flying, and - critically - a desperate need for economical 90-seaters.

I think a fair compromise is a 1:1 replacement of the ERJ fleet with CRJ-700s or E-170s (AMR's discretion). No net fleet growth for Eagle but it puts more seats into the system and allows Eagle to become more cost competitive. Now of course AMR might still want/need some 50 seaters but this option would at least allow them to replace all the ERJs they want with 70 seaters.

In exchange for that, 90-100 seaters (E-190/1955s or C-Series) at mainline flown at a competitive rates, around Jet Blue pay rates. This would actually be a huge sacrifice on APA's part because there would be a ton of MD-80s parked in favor of these 90 and 100 seat aircraft at a much lower pay scale. However the benefit to the company would be immense.

Any attempt to put 90 seaters at Eagle is a non-starter. Figure out a way to make it work at mainline. No other legacy carrier has 90 seaters at their regionals. AA wouldn't be at a competitive disadvantage by not having them at Eagle.

Quoting commavia (Reply 110):
I suspect that AA is raising precisely those issues with the APA right now, and I think - hope - the two sides can agree on something sensible that benefits both sides. As I have long argued, I think the company and the union could and should agree on a veritable "grand bargain" where the APA agrees to relatively lower pay scales more competitive with where small jet

I think a deal can be made too but the first thing that needs to be addressed is the trust/bonus issue. Arpey and company need to stop taking bonuses now (I'd actually argue a bigger gesture would be for Arpey to forgo all pay for a year).

Quite simply the view of employees is that all of their sacrifices ultimately amount to nothing because the fundamental mistakes are continually made by management. I'm talking more about bonuses here and addressing the inherent inefficiencies that plague the current AMR structure. There are far too many managers at AMR that do absolutely nothing or couldn't have their jobs done by someone else. If AMR wants it's frontline employees to become more efficient then the back office ones need to become more efficient as well.

With out fundamental changes to the way the company is run and structured any sacrifices by labor will be meaningless because the same mistakes will continue to be made. Otherwise employees will continue to feel that they are subsidizing poor management out of their pocket books.

That said I don't think there has to be wage cuts necessarily but rather productivity improvements. The employees will work harder for the company they just don't want to feel under appreciated and when management constantly tells employees they are the problem (despite past sacrifices) with out making any sacrifices or changes themselves then it destroys morale and destroys the will to make sacrifices.

Think about it this way, most of us get frustrated with Washington increasing taxes while watching government make the same mistakes over and over again. No one wants to subsidize poor decisions and poor leadership. The same is true for AMR employees.
 
jacobin777
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 3:07 pm

Quoting goldenstate (Reply 109):
These statements are slightly misleading

Not "misleading" but incomplete..I'll admit do that.

Quoting goldenstate (Reply 109):
While it is true that UAL and US terminated substantially all of their defined benefit pensions and turned them over to the PBGC, UAL has now inherited CO's defined benefit plan liability.

Given UA's size to CO's size when they merged, its still better off that UA's old pension (in terms of ease of payment).

Quoting goldenstate (Reply 109):
DAL chose to terminate only its pilot pension and today continues to administer and contribute to the frozen PMDL nonpilot and PMNW pensions.

Which as a % is still much smaller. Not to mention, if I'm not mistaken,for DL (but not sure for UA), when DL relisted on the NYSE (re-IPO), a lot of their shares went to pay-off part of their pensions.

Quoting goldenstate (Reply 109):
By simply freezing the defined benefit pension, AMR would both decrease the amount of their pension benefit liability and be granted a more generous timetable in which to fully fund it.

Which would help AA's cash-flow.

Quoting goldenstate (Reply 109):
If AMR terminated all of their pension plans with financial distress as their justification, they could be liable for as much as $700M in termination premiums over three years

Which is much less than the about $500 million/per year they are having to fork out right now.
"Up the Irons!"
 
ual777
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 3:10 pm

Quoting commavia (Reply 110):

But, that being said, I don't see the pension as AA's biggest issue with the labor contracts. Far more pressing is productivity, and beyond that, I actually think the single biggest issue AA needs to address is flexibility. That's where the pilot contract, especially, comes in. AA needs the ability to rapidly adapt to evolving market dynamics in new ways that at the moment are challenging with the current pilot contract. Two that come to mind immediately are more flexibility to do economical longhaul flying, and - critically - a desperate need for economical 90-seaters.

I suspect that AA is raising precisely those issues with the APA right now, and I think - hope - the two sides can agree on something sensible that benefits both sides. As I have long argued, I think the company and the union could and should agree on a veritable "grand bargain" where the APA agrees to relatively lower pay scales more competitive with where small jet (

Agree. APA's problem is their lack of flexibility for the company. I am as staunch a pilot supporter as they come here, but AMR does need flexibility in their contract. Not CO reserve slavery flexibility, but something akin to what UA and DL have.

The company and the union then need to get together on a contract rate for 90 seat aircraft. If AA can do these two things, in 24 months things will start to look a lot better.
It is always darkest before the sun comes up.
 
commavia
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 4:32 pm

Quoting mogandoCI (Reply 111):
LAX-SAN is a 2 hour drive and that justifies >10x daily ? Everyone on that flight would simply be connecting. That 10x would be better sent to DFW than LAX.

First, there are tons of connections that flow out of SAN over LAX to places all over the world - not just heading to the eastern U.S. Second, that frequency today - around 10-12 daily - is down from nearly double that a decade ago. They have already pulled down frequency and capacity dramatically.

Quoting norcal (Reply 112):
I think a fair compromise is a 1:1 replacement of the ERJ fleet with CRJ-700s or E-170s (AMR's discretion). No net fleet growth for Eagle but it puts more seats into the system and allows Eagle to become more cost competitive. Now of course AMR might still want/need some 50 seaters but this option would at least allow them to replace all the ERJs they want with 70 seaters.

I doubt it would even be 1-for-1. If AA could get the financing and place an order for 100-150 EJets tomorrow, with some being 90-seaters to replace the lower-end of the MD80 network, and most being 70- or 90-seaters as ERJ replacements, I'm sure they'd love that. But there are some markets where that will just be too large a plane, and in those markets, AA will likely stick with a smallish (probably less than 75) fleet of ERJ145s, or move more and more capacity to a modern prop like the Q400 where economic/feasible.

Quoting norcal (Reply 112):
In exchange for that, 90-100 seaters (E-190/1955s or C-Series) at mainline flown at a competitive rates, around Jet Blue pay rates. This would actually be a huge sacrifice on APA's part because there would be a ton of MD-80s parked in favor of these 90 and 100 seat aircraft at a much lower pay scale. However the benefit to the company would be immense.

A huge sacrifice in the short-run, but in the long run it would not only strengthen the company, but also substantially increase the number of dues-paying members in the union.

Quoting norcal (Reply 112):
Any attempt to put 90 seaters at Eagle is a non-starter. Figure out a way to make it work at mainline.

Agreed. Eagle will never get 90-seaters, nor should they. There is no reason the company and the APA shouldn't be able to work out a deal to put that capacity at mainline.

Quoting norcal (Reply 112):
No other legacy carrier has 90 seaters at their regionals.

Delta does, as does USAirways I believe.

Quoting norcal (Reply 112):
I think a deal can be made too but the first thing that needs to be addressed is the trust/bonus issue. Arpey and company need to stop taking bonuses now (I'd actually argue a bigger gesture would be for Arpey to forgo all pay for a year).

Well, the unions were there eight years ago when this compensation package was negotiated. I agree it's time for a new one, and I agree the unions should be part of that conversation. Back in 2003, the unions wanted management's compensation incentives aligned with those of employees, who back then collectively received thousands of stock options. Thus, the incentives were structured so the better the stock price performed relative to competitors, the better management did, and the more valuable employees' stock options became.

However, of course, now with 20/20 hindsight of how the last deal worked out, the unions would no doubt want management compensation structured differently. I think the basis for top management's incentive compensation should still be based on driving enterprise value, and value for employees. Perhaps some form of stock- or profit-based performance compensation for management, and first-dollar profit sharing for employees?
 
AAIL86
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 4:54 pm

Quoting norcal (Reply 112):
Quite simply the view of employees is that all of their sacrifices ultimately amount to nothing because the fundamental mistakes are continually made by management. I'm talking more about bonuses here and addressing the inherent inefficiencies that plague the current AMR structure. There are far too many managers at AMR that do absolutely nothing or couldn't have their jobs done by someone else. If AMR wants it's frontline employees to become more efficient then the back office ones need to become more efficient as well.

     
Excellent post, Norcal. This is an almost perfect description of how the majority of AA employees feel (as a former ops manager with AA, I can confirm this). Contrary to what some posters on here think(whose AA experence is probably limited to flying around), the vast majority of AA employees want the company to succeed and work hard to try and accomplish it. They just don't trust current AA management, or feel they owe the company any more concessions.

Ironically enough, a great many of the senior employees wish for Crandall's return...

NorCal, welcome to my respected users' list.
The way to see by faith is to shut the eye of reason - Benjamim Franklin
 
ckfred
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 5:01 pm

Quoting par13del (Reply 96):
there are no political constraints preventing new startups.

But there are financial constraints. Would you want to start a new airline in this economy? Try getting financing, whether from large banks or private equity.

Quoting United1 (Reply 98):
I never said abandon I said cut back....significantly and remake the hub from a transfer hub to an O&D based hub. This would allow AA to cut costs and concentrate on some of the higher yielding ORD traffic. It would be an easy solution to cut AAs costs without gutting the network.

ORD has been cut back. If you look at a lot of routes, ORD will have 4 or 5 departures, while DFW has 10 or more. Or ORD is all RJ, while DFW has all mainline

Quoting CALPSAFltSkeds (Reply 105):
- ORD may be difficult as my guess is AA is way behind UA in seats and frequency on most ORD markets. Looking at the ORD timetable, you can go pages without seeing very many AA mainline aircraft.

The disparity isn't as great as people think. For instance, both UA and AA fly a mix of mainline and RJ on ORD-MSP. That's a route that UA flew long before deregulation. On ORD-ATL, AA is all Eagle, while UA has one mainline jet. I can remember back in the 1990s that UA often had 1 or 2 757s on that route.

Remember that AA shifted a lot of flying to DFW, when the FAA limited the arrival rate at ORD. Then, as the City of Chicago jacked up the landing fees to pay for ORD expansion bonds, AA decided to keep flying out of DFW, rather than shift flying back to ORD.

Rahm Emmanuel, the new mayor of Chicago, wants to get ORD back ahead of ATL as the world's busiest airport. That leads me to believe that he's interested in getting both UA and AA to put more traffic throught ORD.
 
jacobin777
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 5:03 pm

Quoting Jacobin777 (Reply 113):
Which as a % is still much smaller. Not to mention, if I'm not mistaken,for DL (but not sure for UA), when DL relisted on the NYSE (re-IPO), a lot of their shares went to pay-off part of their pensions.

Of interest:

"The PBGC received more than 11 million shares of UAL in exchange for taking over United's pension plans".

http://www.marketwatch.com/story/pbg...ilot-pensions-as-6th-largest-claim


Regarding DL:

"Third, in extreme cases, the PBGC has even ended up with an equity stake in companies in order to fulfill claims against sponsors of plans that have been taken over. In May of 2007 the PBGC acquired a 20% stake in Delta Air Lines as part of its bankruptcy reorganization. Delta argued that it would not be able to emerge from bankruptcy because of the $3 billion underfunded Pilots Retirement Plan and requested to terminate it. PBGC became the trustee of the plan, at the time the sixth largest claim it inherited, and then sought an unsecured claim of $2.2 billion against Delta. Similarly, PBGC found a similar situation at United Airlines and acquired a 23% stake in that company as part of its bankruptcy reorganization.

http://www3.gsionline.com/legalcurre...0090127_E4.asp?contactid=LearnWLCB

DL filed its IPO in IIRC May or June of 2007. As I mentioned above, I wonder if part of the IPO was to pay back some/all of the pensions obligations against the PBGC.
"Up the Irons!"
 
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jfklganyc
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 5:06 pm

"In exchange for that, 90-100 seaters (E-190/1955s or C-Series) at mainline flown at a competitive rates, around Jet Blue pay rates. This would actually be a huge sacrifice on APA's part because there would be a ton of MD-80s parked in favor of these 90 and 100 seat aircraft at a much lower pay scale. However the benefit to the company would be immense."

Common misinformation: JetBlue 190 rates are very high. 90% of Airbus rates to be exact, which is industry leading. That means a 190 guy at B6 is likely making more than an MD80 guy at AA.

The difference is, which we keep harping about, B6 pilots are more productive. Many working well into the 80s or 90+ hour each month.

Want better pay? Need to get productive. It's a good trade and capitalism at its finest!
 
SeeTheWorld
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 6:20 pm

Quoting flyby519 (Reply 100):
Is it possible to create a relationship like AA+BA have except on a domestic AA+B6 level? Complete anti-trust immunity, allowing AA/B6 to coordinate schedules/fares/revenue/etc. B6 keeps its low cost structure, gains serious pax traffic from AA in areas where AA cant compete effectively (BOS, FLL, JFK)

Antitrust immunity is only available with foreign carriers because merging with a foreign carrier is not allowed. Antitrust immunity in the U.S. between U.S. carriers is illegal ... You option is to merge.
 
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par13del
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 6:44 pm

Quoting ckfred (Reply 117):
But there are financial constraints. Would you want to start a new airline in this economy? Try getting financing, whether from large banks or private equity.

Well since 9/11 the airline industry has lost billions yet there does not appear to be any shortage of investors or current ones jumping ship. How exactly has AA been around for so many years while loosing money each year, certainely the increase in debt means that someone somewhere has been willing to put up the funds, maybe the existing ones simply do not realise its just a black hole they are throwing money into.
Boeing and Airbus somehow just accomplished the same trick by getting someone to finance AA's purchase on a few hundred a/c.

Airlines are a cash intensive busines, maybe that's the attraction to some investors, but if the red ink numbers thrown around are accurate, only crazy people purchase and or maintain airlines shares.
 
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lightsaber
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 7:15 pm

Quoting jfklganyc (Reply 119):
The difference is, which we keep harping about, B6 pilots are more productive. Many working well into the 80s or 90+ hour each month.

Want better pay? Need to get productive. It's a good trade and capitalism at its finest!

That is the crux. Certain costs are fixed per pilot (overhead, training, health care, most other benefits), so having a pilot work 11% more per month is a 10% cut in the 'fixed per pilot' costs. Of course B6 must then pay salary, liability insurance, and other costs at a per hour basis that isn't impacted by the number of pilots. B6 also has a far more automated paperwork system that allows faster turn times and thus their pilots spend less time than AA pilots waiting or 'doing the paper.' But would APA conceed to rule changes that require hiring hundreds fewer dues paying members?   

The bigger productivity difference is flight attendants and overhead staff.

Lightsaber
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caliboy78
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 7:33 pm

As I read this post I've noticed that AA has and will always have the unions that ultimately do not care of the well being of the company but of themselves. I honestly think that AA does needs to get the Head Masters to cut their big salaries and bonuses but I strongly believe that all groups also need to trim. Now if the pilots were to release those scopes that is ultimately harming the company might mean better or longer routes, better plane routings with the right airplane etc etc. Bottom line I honestly think that if everyone can work together AA will be in a much better state.
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jacobin777
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 7:42 pm

Quoting caliboy78 (Reply 123):
Now if the pilots were to release those scopes that is ultimately harming the company might mean better or longer routes,

APA is "scared" that AA will shift more of the flying away from mainline.   

They seem to gloss over the other facts that it will allow AA mainline to expand and as you mentioned, probably an increase in longer and better routes...but don't forget, we're talking about the APA here...  
"Up the Irons!"
 
caliboy78
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 7:50 pm

APA is "scared" that AA will shift more of the flying away from mainline.   

They seem to gloss over the other facts that it will allow AA mainline to expand and as you mentioned, probably an increase in longer and better routes...but don't forget, we're talking about the APA here...  

I couldn't agree more. The sad thing is that greet is unfortunate and I hope they all realize that the lives of 60K+ people and their families are a stake here.
TAAke pride on what you do and do it well.
 
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par13del
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 7:53 pm

Quoting caliboy78 (Reply 123):
Now if the pilots were to release those scopes that is ultimately harming the company might mean better or longer routes, better plane routings with the right airplane etc etc.
Quoting Jacobin777 (Reply 124):
APA is "scared" that AA will shift more of the flying away from mainline.

They seem to gloss over the other facts that it will allow AA mainline to expand and as you mentioned, probably an increase in longer and better routes...but don't forget, we're talking about the APA here...

Also, they can look at what has taken place at UA, and DL to see how Chpt.11 affected the scope at those airlines and see what is in it for them, certainely the sentiments expressed above were voiced prior to both those carriers entering Chpt.11, follow up threads tend to deal with the current carriers performance and not those individual items which were major issues prior to filing.
Did UA and DL outsouce more mainline flying? We know about pensions, overall pay and benefits, can't say if I recall productivity being increased but those in the know can advise.
 
panamair
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 8:40 pm

Quoting commavia (Reply 115):
Quoting norcal (Reply 112):
No other legacy carrier has 90 seaters at their regionals.

Delta does,

Delta doesn't have any 90-seaters; the regional fleet tops out with the 76-seat CR9s and E175s.
 
flyby519
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 8:48 pm

Quoting panamair (Reply 127):
Delta doesn't have any 90-seaters; the regional fleet tops out with the 76-seat CR9s and E175s

How many seats do the DC9s have? More than 90, but they fill the gap between E175 and MD80
 
FlyASAGuy2005
Posts: 3965
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 9:08 pm

Quoting flyby519 (Reply 128):

Seating capacity is 125 (16F 109Y). The 88s is a bit of a jump at 149 (16F 133Y in the new setup).
What gets measured gets done.
 
ual777
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 9:22 pm

Quoting caliboy78 (Reply 125):


They seem to gloss over the other facts that it will allow AA mainline to expand and as you mentioned, probably an increase in longer and better routes...but don't forget, we're talking about the APA here...

I couldn't agree more. The sad thing is that greet is unfortunate and I hope they all realize that the lives of 60K+ people and their families are a stake here.

AA mainline would NOT expand. That has been proven over, and over, and over again at every legacy carrier. What APA needs to do is increase productivity and come up with a reasonable payscale for 70-90 seat jets.

Quoting caliboy78 (Reply 123):


As I read this post I've noticed that AA has and will always have the unions that ultimately do not care of the well being of the company but of themselves. I honestly think that AA does needs to get the Head Masters to cut their big salaries and bonuses but I strongly believe that all groups also need to trim. Now if the pilots were to release those scopes that is ultimately harming the company might mean better or longer routes, better plane routings with the right airplane etc etc. Bottom line I honestly think that if everyone can work together AA will be in a much better state.

Release the scopes and bring on literally thousands of layoffs? I think not. There is a middle ground to be found but this isn't it.
It is always darkest before the sun comes up.
 
ikramerica
Posts: 14871
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 9:33 pm

Quoting mogandoCI (Reply 111):
LAX-SAN is a 2 hour drive and that justifies >10x daily ? Everyone on that flight would simply be connecting. That 10x would be better sent to DFW than LAX.

What SoCal do you live in? Maybe if you speed in the middle of the night you can do SAN-LAX in two hours, but it can take up to two hours to just get south of SNA during some rush hours.

Quoting ual777 (Reply 130):
AA mainline would NOT expand. That has been proven over, and over, and over again at every legacy carrier. What APA needs to do is increase productivity and come up with a reasonable payscale for 70-90 seat jets.

Same for UA/CO. Pilot costs are a big part of the conflict there too, though there are other factors such as making a 20 year commitment to this type of aircraft vs. contract flying that can be added and removed over shorter timeframes.
Of all the things to worry about... the Wookie has no pants.
 
ual777
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 9:52 pm

Quoting ikramerica (Reply 131):

Same for UA/CO. Pilot costs are a big part of the conflict there too, though there are other factors such as making a 20 year commitment to this type of aircraft vs. contract flying that can be added and removed over shorter timeframe

Management is also a big part of the conflict. UAL does NOT need more scope relief. They have the highest margins in the business right now, and they signed the contract on the CO side limiting the scope to 50 seat RJs. The pilot groups are due a pay raise and management knows this, but again they do not want to pay out.

ALPA and management need to come together and hash out a contract that keeps UAL flying on the UAL senority list. Being quite honest, the pilots on both the UA/CO side are not going to give up another inch of scope. The last time UA pilots did that, almost 1 in 7 UA pilots were furloughed with the retirement of the 737 fleet. CO pilots know this and scope relief is (rightfully so) DOA.

The pilot group is unique to the other labor groups.. It is in reality a highly-skilled management position. I have seen over and over times when we can make the difference in a flight regarding on-time performance, fuel burn, pulling the jet way back to take on a few late, connecting passengers (and still be on-time), etc etc, but nobody does because they have stripped the authority away from the captain, and they have pissed many guys off so much that they have become apathetic. Sadly, the attitude becomes "the company doesn't have my back, why should I have theirs?"

Most pilots I know would lay down in the street for the company if they were treated well, but the sad truth is we aren't. We are treated "ok", but not well by any means. Go look up a copy of the CO pilot contract and their reserve rules. They are absolutely horrific. Mix it in with $27 dollar per hour hew-hire pay, and no insurance for 6 months, and what does management expect the attitude to be?

The pilot groups at all majors are going to make gains with this next round of contracts. Nothing mind-blowing, but gains nonetheless.
It is always darkest before the sun comes up.
 
ikramerica
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 10:17 pm

Quoting ual777 (Reply 132):
UAL does NOT need more scope relief. They have the highest margins in the business right now, and they signed the contract on the CO side limiting the scope to 50 seat RJs. The pilot groups are due a pay raise and management knows this, but again they do not want to pay out.

Whatever. You are flat out wrong on all points. They DO need scope relief or a reasonable pilot pay scale, and CO does/did want to fly more than 50 seats but the unions "won" that fight. As for "due a pay raise" it's once again the unions' inability to grasp the new normal condition.

You really don't seem to understand how angry it makes the rest of the USA over the last 3 years to listen to unions with employed, well paid members bitch about how underpaid they are. You (the APA, the government unions, etc.) truly don't grasp the pain the rest of this nation is going through, including many other union groups out there with low pay, high unemployment bases.

It sounds so greedy to hear how you are "due" more money. We, the public, are dealing with reduced capacity and higher prices to fly during a period when we can afford it least, but you complain about how you are "due" more money, while you get to travel for free when not working 80 hours a month. Cry me a river.

You are not "due" anything. You should be freaking thankful you have a good paying job.
Of all the things to worry about... the Wookie has no pants.
 
Rdh3e
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 10:17 pm

Quoting ual777 (Reply 132):
They have the highest margins in the business right now, and they signed the contract on the CO side limiting the scope to 50 seat RJs. The pilot groups are due a pay raise and management knows this, but again they do not want to pay out.

The highest margins in the business and they're still what? 4% net? No one needs a raise until that figure is in 2 digits. Another fuel spike could just as easily send that negative.

Quoting ual777 (Reply 132):
Sadly, the attitude becomes "the company doesn't have my back, why should I have theirs?"

Because they're paid to.
 
norcal
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 10:27 pm

Quoting commavia (Reply 115):
Delta does, as does USAirways I believe.

Nope Delta is limited to a small number of 76 seaters (E-175s) and US Airways flies E-190s at mainline. No legacy carrier flies E-190s at their regional

Quoting commavia (Reply 115):
I doubt it would even be 1-for-1. If AA could get the financing and place an order for 100-150 EJets tomorrow, with some being 90-seaters to replace the lower-end of the MD80 network, and most being 70- or 90-seaters as ERJ replacements, I'm sure they'd love that. But there are some markets where that will just be too large a plane, and in those markets, AA will likely stick with a smallish (probably less than 75) fleet of ERJ145s, or move more and more capacity to a modern prop like the Q400 where economic/feasible.

Just an option and I agree that they could very well need ERJ-145s. 1-to-1 might be a big concession though to sweeten the pot for AMR management.

As far as turbo props go, as much as I love the Q-400 it is a bit expensive to buy, plus Eagle has decades of experience with the ATR. The ATR-72-600s are extremely modern and they sip fuel, plus the infrastructure is already in place. These would be a better bet.

Quoting commavia (Reply 115):
Agreed. Eagle will never get 90-seaters, nor should they. There is no reason the company and the APA shouldn't be able to work out a deal to put that capacity at mainline.

  

Quoting commavia (Reply 115):
I think the basis for top management's incentive compensation should still be based on driving enterprise value, and value for employees. Perhaps some form of stock- or profit-based performance compensation for management, and first-dollar profit sharing for employees?

Sounds good to me and let me go on the record and say I have no problem with management getting big bonuses I just think they need to earn them. Losing hundreds of millions of dollars or taking them when your employees are sacrificing pay and benefits is unacceptable.

If AA were as consistently profitable and well run a Southwest I'd be totally ok with Arpey and Co. getting big bonuses. Give him 5, 10, 20 million in cash, I don't care so long as the company is profitable and well run in an ethical manner.

Quoting Jacobin777 (Reply 124):
They seem to gloss over the other facts that it will allow AA mainline to expand and as you mentioned, probably an increase in longer and better routes...but don't forget, we're talking about the APA here...

No AA mainline would not expand if 90 seat jets (or Eagle grew fleet size with 70 seat jets) this has been demonstrated plenty of times.

Exhibit A: United Airlines, relaxation of scope cost 1400 pilot jobs when the 737 fleet was parked. Continental with their tighter scope lost 10% (140) to furloughs during the same time frame

Exhibit B: Delta's mainline has shrunk drastically. In 2000 Delta's fleet alone was 630. The current combined Delta/Northwest fleet is just 720. So much mainline capacity was cut and replaced with regional jets when scope was relaxed.

The Delta regional fleet has grown to 651 jet aircraft with a huge bump in seating capacity.

If any carrier were to relax scope to the point to allow 90-100 seaters at regionals it would essentially replace most of the narrowbody flying currently done at mainline. A few long point to point routes would be kept but a majority of the mainline narrowbody fleet would be retired over time. It has happened with 70 seaters replacing DC-9s, MD-80s, 727s, 737 classics etc. at increased frequency. It would happen again with 90-100 seaters replacing 737NGs and A320s at increased frequency.

Then in 10-20 years time we can listen to people like you talk about how "greedy pilots" aren't allowing widebody aircraft at regionals. God forbid anyone have the audacity to want to keep their job  
Quoting ual777 (Reply 130):
AA mainline would NOT expand. That has been proven over, and over, and over again at every legacy carrier. What APA needs to do is increase productivity and come up with a reasonable payscale for 70-90 seat jets.

  

Quoting ual777 (Reply 130):
Release the scopes and bring on literally thousands of layoffs? I think not. There is a middle ground to be found but this isn't it.

  
 
norcal
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 10:43 pm

Quoting ikramerica (Reply 133):
They DO need scope relief or a reasonable pilot pay scale, and CO does/did want to fly more than 50 seats but the unions "won" that fight.

If it was that important to the company they wouldn't have agreed to it. Furthermore CO gains many other benefits from its groups that competitors don't have. Mainly their atrocious reserve scheduling system.

Quoting ikramerica (Reply 133):
You really don't seem to understand how angry it makes the rest of the USA over the last 3 years to listen to unions with employed, well paid members bitch about how underpaid they are. You (the APA, the government unions, etc.) truly don't grasp the pain the rest of this nation is going through, including many other union groups out there with low pay, high unemployment bases.

Wow, really?

After all the furloughs and gutting of pay, benefits, and retirement from all the chapter 11 proceedings and voluntary employee give backs I'd say that enough has been sacrificed. Of course you haven't worked one friggin' day at an airline but I guess that you are an expert!  
Quoting ikramerica (Reply 133):
It sounds so greedy to hear how you are "due" more money. We, the public, are dealing with reduced capacity and higher prices to fly during a period when we can afford it least, but you complain about how you are "due" more money, while you get to travel for free when not working 80 hours a month. Cry me a river.

Hey guess what chief flying is cheaper than it's ever been, even with all the new fees. God forbid an airline raise prices to cover the higher price of gas. You like to talk about how out of touch unions are? Well guess what, you are completely out of touch when you whine about the "high cost of air travel." If it's so expensive drive or take the train next time! Flying is a service, a premium service given the speed advantage, you aren't entitled to anything particularly cheap travel.

Fittingly under the section titled: AIRLINES' RIGHT TO PROFITABILITY

"The bottom line, Herbst said, is that the government has to let airlines work on becoming better, rather than forcing regulations aimed at making air travel cheaper. After all, average domestic airfares, adjusted for inflation, have fallen 16% since 1995 including baggage fees, and 21% excluding those fees, according to the DOT."

Read more: http://www.foxbusiness.com/travel/20...fe-into-us-airlines/#ixzz1Zwwz3yem
 
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mariner
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 10:53 pm

Quoting norcal (Reply 136):
Hey guess what chief flying is cheaper than it's ever been, even with all the new fees. God forbid an airline raise prices to cover the higher price of gas.


  

For all the differences there have been between us in the past, you and I are in complete agreement on this one.

mariner
aeternum nauta
 
FlyASAGuy2005
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 10:53 pm

Quoting norcal (Reply 135):
Nope Delta is limited to a small number of 76 seaters (E-175s) and US Airways flies E-190s at mainline. No legacy carrier flies E-190s at their regional

I wouldn't call a fleet of 153 CR9s and 175s small   Honestly, I think that number is too high but that's for another thread I guess.

[Edited 2011-10-05 15:56:49]
What gets measured gets done.
 
StuckInCA
Posts: 1657
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RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 11:13 pm

Quoting ikramerica (Reply 131):
What SoCal do you live in? Maybe if you speed in the middle of the night you can do SAN-LAX in two hours, but it can take up to two hours to just get south of SNA during some rush hours.

While you're not wrong, you're not really arguing his point. If you live in SoCal, if not for connections, would you fly from LAX to SAN (or reverse)? I'd have never considered it. That's a driving route. That's his point (I think).
 
ual777
Posts: 1636
Joined: Thu Aug 14, 2003 6:18 am

RE: AA/AMR Market Cap Now Below $1B

Wed Oct 05, 2011 11:59 pm

Quoting rdh3e (Reply 134):

The highest margins in the business and they're still what? 4% net? No one needs a raise until that figure is in 2 digits. Another fuel spike could just as easily send that negative.

7.5% net for the second quarter.

Quoting ikramerica (Reply 133):

Whatever. You are flat out wrong on all points. They DO need scope relief or a reasonable pilot pay scale, and CO does/did want to fly more than 50 seats but the unions "won" that fight. As for "due a pay raise" it's once again the unions' inability to grasp the new normal condition.

You really don't seem to understand how angry it makes the rest of the USA over the last 3 years to listen to unions with employed, well paid members bitch about how underpaid they are. You (the APA, the government unions, etc.) truly don't grasp the pain the rest of this nation is going through, including many other union groups out there with low pay, high unemployment bases.

It sounds so greedy to hear how you are "due" more money. We, the public, are dealing with reduced capacity and higher prices to fly during a period when we can afford it least, but you complain about how you are "due" more money, while you get to travel for free when not working 80 hours a month. Cry me a river.

You are not "due" anything. You should be freaking thankful you have a good paying job.

First, what I really want to tell you would get me banned. Second, you have no clue what you are talking about. None.

I make about $1,800 to $2,000 dollars gross per month. I spend my overnights using the coffee maker in the hotel room to heat instant oatmeal and ramen noodles because my per diem is chewed up on living expenses.

I was also home 8 nights last month. Eight.

I worked out what I work compared to a normal job and I work about 75-80 hours a week while I am paid for 20-25. Thats not including the time spent at the hotel, commuting to work, doing Jepp revisions, etc etc.

I'm sure your response is 'well its your choice to commute.' Tell me where I can afford an apartment in NYC for $500 dollars a month and not take gunfire on the way to work.

Further, there are many trips where we run 14-15 hour duty days only to have a 8:30 min overnight (including the hour or so getting to the hotel room) only to be followed by another 12 hour day. It equates to about 5 hours of sleep in case you are wondering. Oh, and lets not forget how I can have my days off rolled (and sometimes not restored), and I am under the constant threat of having my licenses pulled if I ever screw up.

Before you go telling me that my job is entry-level, I have a four year degree plus about 2 years of flight training tacked onto it. I also spent almost 2 years teaching people how to fly (most of whom who did not speak english as a first language) and was almost killed twice. I paid my ****** dues.

There are guys at UAL who were hired in 1999(!!!) who are just now getting back from furlough thanks to scope relief. Lets not forget that if you list on a resume that you are furloughed from a major, MOST places won't touch you because they know you will accept recall.

Now tell me that I am an overpaid union knuckle-dragging thug and we dont feel the country's pain.

People with your opinion disgust me. You think that tickets should be damn near free and that we don't suffer. I would like to point out to you that this profession carries one of the highest divorce rates in the country, and I have seen countless examples of guys being cheated on or coming back from a trip to an empty house.

The airlines have been losing money since deregulation because air travel is TOO CHEAP. That is the truth. It is rediculously cheap considering what the passenger receives in return. Why do you think everyone is reducing capacity right now? For fun?

We don't want 20 days off and $400K a year. However, I think $200-$230K for a SENIOR widebody captain is not too much. Neither is 14-15 days at home to spend time with your family so they don't leave you.

If you want bus drivers, scope is the way to get them. I hope you like seeing more crashes ala Colgan and Air France, with people who have no business being in a cockpit.

There is already a pilot shortage looming, and if more scope is given up, myself and many others are going to leave because we won't spend our careers at some regional. Its simply not worth it. Most of us are very bright individuals who could do well at another profession.

Out of curiosity, what is a "reasonable pay scale" to you?

Lastly, we don't get to fly for free anymore. Especially if its in business or first.
It is always darkest before the sun comes up.
 
bennett123
Posts: 8866
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RE: AA/AMR Market Cap Now Below $1B

Thu Oct 06, 2011 12:14 am

Which Air France crash are you referring to?.
 
ual777
Posts: 1636
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RE: AA/AMR Market Cap Now Below $1B

Thu Oct 06, 2011 12:20 am

Off the coast of Brazil.
It is always darkest before the sun comes up.
 
commavia
Posts: 11489
Joined: Mon Apr 25, 2005 2:30 am

RE: AA/AMR Market Cap Now Below $1B

Thu Oct 06, 2011 12:32 am

Quoting norcal (Reply 135):
Nope Delta is limited to a small number of 76 seaters (E-175s) and US Airways flies E-190s at mainline. No legacy carrier flies E-190s at their regional

Delta doesn't have tons of 90-seaters flying at multiple regional carriers, along with tons of 70-seaters as well?

Am I missing something?

Quoting norcal (Reply 135):
As far as turbo props go, as much as I love the Q-400 it is a bit expensive to buy, plus Eagle has decades of experience with the ATR. The ATR-72-600s are extremely modern and they sip fuel, plus the infrastructure is already in place. These would be a better bet.

I agree. As much as I would prefer the Q400, I agree that for a variety of economic and operational reasons, newer-build ATR72s probably do make more sense. A lot of the infrastructure and systems are already in place at AMR/Eagle, the acquisition costs are likely lower, and the newer ones are probably perfectly economical.

My main concern is that AMR would do the typical "AA special" to these planes and buy them as cheap as possible - like the horrific state of the ATRs they have now.
 
jacobin777
Posts: 12262
Joined: Sat Sep 11, 2004 6:29 pm

RE: AA/AMR Market Cap Now Below $1B

Thu Oct 06, 2011 1:27 am

Quoting norcal (Reply 135):
Sounds good to me and let me go on the record and say I have no problem with management getting big bonuses I just think they need to earn them. Losing hundreds of millions of dollars or taking them when your employees are sacrificing pay and benefits is unacceptable.

You obviously don't now how AA management's bonus structure is paid out. Needless to say, they have received very little bonus over the past decade. There was one larger payout in 2006 or 2007 because the stock did well -that was approved by the unions and the unions had the opportunity to be part of that stock options structure but decided to take cash up front.

Quoting norcal (Reply 135):
Quoting Jacobin777 (Reply 124):
They seem to gloss over the other facts that it will allow AA mainline to expand and as you mentioned, probably an increase in longer and better routes...but don't forget, we're talking about the APA here...

No AA mainline would not expand if 90 seat jets (or Eagle grew fleet size with 70 seat jets) this has been demonstrated plenty of times.

Exhibit A: United Airlines, relaxation of scope cost 1400 pilot jobs when the 737 fleet was parked. Continental with their tighter scope lost 10% (140) to furloughs during the same time frame

Exhibit B: Delta's mainline has shrunk drastically. In 2000 Delta's fleet alone was 630. The current combined Delta/Northwest fleet is just 720. So much mainline capacity was cut and replaced with regional jets when scope was relaxed.

The Delta regional fleet has grown to 651 jet aircraft with a huge bump in seating capacity.

If any carrier were to relax scope to the point to allow 90-100 seaters at regionals it would essentially replace most of the narrowbody flying currently done at mainline. A few long point to point routes would be kept but a majority of the mainline narrowbody fleet would be retired over time. It has happened with 70 seaters replacing DC-9s, MD-80s, 727s, 737 classics etc. at increased frequency. It would happen again with 90-100 seaters replacing 737NGs and A320s at increased frequency.

IIRC, US has E190's in their mainline fleet. Also, the ability of a company to adjust to its ever-changing environment is a must to succeed and survive. History has shown what happens to a company when it cannot change and/or adjust.

Quoting ual777 (Reply 140):
Quoting rdh3e (Reply 134):

The highest margins in the business and they're still what? 4% net? No one needs a raise until that figure is in 2 digits. Another fuel spike could just as easily send that negative.

7.5% net for the second quarter.

What about full year margins?
"Up the Irons!"
 
adtall
Posts: 55
Joined: Sun Nov 21, 2010 2:53 am

RE: AA/AMR Market Cap Now Below $1B

Thu Oct 06, 2011 1:28 am

Quoting commavia (Reply 143):
Delta doesn't have tons of 90-seaters flying at multiple regional carriers, along with tons of 70-seaters as well?

Delta does not have any 90 seaters either mainline or regional, haven't had any in a long time excluding the ex-NW DC-9-30s that mainline flew. At this point, they're maxed out on the number of 70 and 76 seaters they can have too under the DL pilot's scope.
 
goldenstate
Posts: 155
Joined: Thu Feb 04, 2010 11:24 pm

RE: AA/AMR Market Cap Now Below $1B

Thu Oct 06, 2011 3:49 am

Quoting commavia (Reply 110):
Very true. I suspect that AMR would be more interested in freezing their pension plans, and simply continuing to contribute to future payout liabilities as they stand today, rather than dumping them altogether.

Arpey has said as much in past earnings calls. A pension freeze would set the benefit liability on an immediate downward trajectory. AA does not need a Chapter 11 filing to freeze its pensions. The Pension Protection Act lifted most of the barriers to pension freezes outside of a bankruptcy filing. Pensions clearly will need to be part of whatever long term labor solution is negotiated either by this management team or whoever comes next.

Quoting commavia (Reply 110):
But, that being said, I don't see the pension as AA's biggest issue with the labor contracts. Far more pressing is productivity, and beyond that, I actually think the single biggest issue AA needs to address is flexibility.

Spot on. Productivity improvements drive huge reductions in per-employee fixed costs. Flexibility goes hand in hand with that, and if AA can get to competitive labor productivity AND flexibility, not only does that improve the financial performance of the company as it exists today, it also positions AA to consider meaningful growth for both the core airline as well as ancillary businesses such as airport insourcing and MRO--all of which strengthen job security and create new opportunities.

Quoting Jacobin777 (Reply 113):
Not "misleading" but incomplete..I'll admit do that.

I didn't say intentionally misleading.  
Quoting Jacobin777 (Reply 113):
Which as a % is still much smaller. Not to mention, if I'm not mistaken,for DL (but not sure for UA), when DL relisted on the NYSE (re-IPO), a lot of their shares went to pay-off part of their pensions.
Quoting Jacobin777 (Reply 113):
Which is much less than the about $500 million/per year they are having to fork out right now.
Quoting Jacobin777 (Reply 118):
"Third, in extreme cases, the PBGC has even ended up with an equity stake in companies in order to fulfill claims against sponsors of plans that have been taken over. In May of 2007 the PBGC acquired a 20% stake in Delta Air Lines as part of its bankruptcy reorganization. Delta argued that it would not be able to emerge from bankruptcy because of the $3 billion underfunded Pilots Retirement Plan and requested to terminate it. PBGC became the trustee of the plan, at the time the sixth largest claim it inherited, and then sought an unsecured claim of $2.2 billion against Delta. Similarly, PBGC found a similar situation at United Airlines and acquired a 23% stake in that company as part of its bankruptcy reorganization.

As I noted in a previous post, AA's pension benefit liability as a percentage of annual revenues is very comparable to DL's. The article you quote references the unsecured claim that the PBGC sought in lieu of future plan contributions that DL obviously would not be making in the future. This is concurrent to the termination premium (think of it as a penalty payment) that former sponsors of terminated plans must pay over a three year period following plan termination (and which has now doubled since the PPA was enacted), as well as further liability should future earnings hit certain trigger events. In DL's case, all of these liabilities and potential liabilities are additional to the unsecured claim which they also granted ALPA in exchange for the modified contract.

All told, it cost DL around a third of the reorganized company's equity to restructure pilot compensation--just the pilots, not any other frontline employees--to a sustainable level. It was a significant complicating factor in the bankruptcy.

Quoting ual777 (Reply 132):
ALPA and management need to come together and hash out a contract that keeps UAL flying on the UAL senority list. Being quite honest, the pilots on both the UA/CO side are not going to give up another inch of scope. The last time UA pilots did that, almost 1 in 7 UA pilots were furloughed with the retirement of the 737 fleet. CO pilots know this and scope relief is (rightfully so) DOA.

This is going to be a difficult obstacle. I think all of the majors would be happy to put all flying on their mainline seniority list, provided that mainline pilots will perform that smaller gauge flying at competitive block hour costs. Is UA/CO even asking for scope relief? I suspect they'd be happy to hold the line on PMUA scope for the entire company and grant a no-furlough clause to guarantee job security over the life of the contract.

Quoting ikramerica (Reply 133):

It sounds so greedy to hear how you are "due" more money. We, the public, are dealing with reduced capacity and higher prices to fly during a period when we can afford it least, but you complain about how you are "due" more money, while you get to travel for free when not working 80 hours a month. Cry me a river.

You are not "due" anything. You should be freaking thankful you have a good paying job.

You are also not "due" anything. Labor costs are not the only problem affecting the airline industry. You do not have an inalienable right to dirt cheap air transportation at ruinous expense to airline investors and employees. Airfares need to be further escalated in order to get the industry to long term sustainability. As capacity discipline is the order of the day, hopefully fares will continue to rise so that the stakeholders who actually have some skin in the game can get the returns they deserve.
 
commavia
Posts: 11489
Joined: Mon Apr 25, 2005 2:30 am

RE: AA/AMR Market Cap Now Below $1B

Thu Oct 06, 2011 10:23 am

Quoting adtall (Reply 145):
Delta does not have any 90 seaters either mainline or regional, haven't had any in a long time excluding the ex-NW DC-9-30s that mainline flew. At this point, they're maxed out on the number of 70 and 76 seaters they can have too under the DL pilot's scope.

Ah - now I understand the confusion around my earlier comment. When I originally referred to "90-seaters" flying at Delta and USAirways, I was referring to aircraft that were designed to be in the approximate 90-seat class, though not necessarily those that are actually configured for precisely 90-seats.

Thus, I was specifically referring to the over 100 (Wikipedia) CRJ900s that Delta has at Connection - I realize those jets aren't necessarily configured for exactly 90 seats, but they are in that size class.

Apologies.
 
ikramerica
Posts: 14871
Joined: Mon May 23, 2005 9:33 am

RE: AA/AMR Market Cap Now Below $1B

Thu Oct 06, 2011 4:31 pm

Quoting goldenstate (Reply 146):
You are also not "due" anything. Labor costs are not the only problem affecting the airline industry. You do not have an inalienable right to dirt cheap air transportation at ruinous expense to airline investors and employees. Airfares need to be further escalated in order to get the industry to long term sustainability. As capacity discipline is the order of the day, hopefully fares will continue to rise so that the stakeholders who actually have some skin in the game can get the returns they deserve.

Airfares are not "dirt cheap" and have not been so for quite some time. $600 RT non-refundable from LAX/BUR/ONT to TPA/MCO/SRQ around the holidays is not dirt cheap. Many flights are $700 or more. Some over $1000. That's 2-3 times what they were booking 2-3 months out a few years ago when there was more capacity. And this is why vacation travel is down as much as anything. While hotels are lowering prices to try to attract customers during a recession, airlines are forced to raise prices by their unions, making it nearly impossible for a family to even afford a flying vacation in the USA unless they are "the rich."

Are there fare sales still around? Of course, when there is too much inventory on a specific day or a specific week, or when an airline like VX is trying to win customers at the expense of everyone's bottom line. And airline capacity is not as simple to add an subtract on a daily or weekly basis, and this leads to sales on some days. But $49 fares are not the norm.

But this "airfares are cheap" lie is just an argument used by airline employees to dismiss their customers as cheapskates and continue the "woe is me" attitude. "If only you, the customer would shell out more, I, the employee can get my raise. So, customer who hasn't had a raise in 5 years despite working longer hours and is lucky not to have been laid off, it's your responsibility to pay for my raise, and if you can't afford it, well, spend Christmas alone this year." Not one airline employee on this forum, nor one union member I've heard voice their anger over their situation seems to have ANY empathy for anyone else, so why should you expect sympathy from your customers?

As for airfares needing to be further escalated? Sure, if you mean the only way that you can get raises is to further increase airfares, you might be right. There will be fewer jobs for you as there will be further reduction in flying and more furloughs, but the most senior and very expensive employees will keep their jobs and get raises. The world will be a great place then.

But in reality, the way for airlines to be sustainable is to cut costs. That can mean many things, from higher productivity, to limiting benefits, to freezes on raises, to a lower top end of the payscale, to reducing aircraft lease prices, to more efficient flying, to losing unprofitable routes, etc. But you can't just continue to raise prices on a product, even a pseudo commodity like air travel, and expect that to solve your problems. The falloff in the demand curve gets pretty steep pretty fast.

How do we know airlines can make money at TODAYS airfares? Well, the ones who have been able to cut costs are doing better even at these "dirt cheap" fares, the ones who have not been as successful at cutting costs are doing badly.

AMR needs to cut costs, and labor is part of that equation. But big labor at AA not only doesn't see that, but believes that the labor costs should RISE. It's lunacy.
Of all the things to worry about... the Wookie has no pants.
 
jacobin777
Posts: 12262
Joined: Sat Sep 11, 2004 6:29 pm

RE: AA/AMR Market Cap Now Below $1B

Thu Oct 06, 2011 4:54 pm

Quoting goldenstate (Reply 146):
Quoting Jacobin777 (Reply 113):
Not "misleading" but incomplete..I'll admit do that.

I didn't say intentionally misleading.

Wanted to make sure we go that clear.. 
Quoting goldenstate (Reply 146):

All told, it cost DL around a third of the reorganized company's equity to restructure pilot compensation--just the pilots, not any other frontline employees--to a sustainable level. It was a significant complicating factor in the bankruptcy.

DL's IPO certainly went to funding that deficit.

Quoting goldenstate (Reply 146):
As I noted in a previous post, AA's pension benefit liability as a percentage of annual revenues is very comparable to DL's. The article you quote references the unsecured claim that the PBGC sought in lieu of future plan contributions that DL obviously would not be making in the future. This is concurrent to the termination premium (think of it as a penalty payment) that former sponsors of terminated plans must pay over a three year period following plan termination (and which has now doubled since the PPA was enacted), as well as further liability should future earnings hit certain trigger events. In DL's case, all of these liabilities and potential liabilities are additional to the unsecured claim which they also granted ALPA in exchange for the modified contra

Again, as I mentioned, DL's IPO went to funding (part) of their liabilities. AA filing for BK, "sorting out its house" and re-filing an IPO where shares, etc. went to funding the deficit(like the way DL) did is not only plausible, but probably the way to go. After its IPO, DL at one point had almost a $20 billion dollar market cap. Shares were decently valued. I wouldn't be surprised if PBGC sold shares at the time.

Quoting ikramerica (Reply 148):

But in reality, the way for airlines to be sustainable is to cut costs. That can mean many things, from higher productivity, to limiting benefits, to freezes on raises, to a lower top end of the payscale, to reducing aircraft lease prices, to more efficient flying, to losing unprofitable routes, etc. But you can't just continue to raise prices on a product, even a pseudo commodity like air travel, and expect that to solve your problems. The falloff in the demand curve gets pretty steep pretty fast.
Quoting ikramerica (Reply 148):
AMR needs to cut costs, and labor is part of that equation. But big labor at AA not only doesn't see that, but believes that the labor costs should RISE. It's lunacy.

As I've mentioned ad nuaseum, a company must be able flexible and be able to change (rather quickly) to a changing climate/environment, otherwise it will be "shoved aside". Even after being "shoved aside", it has the ability to "re-invent' itself, but time and understanding the situation (and how to respond to that situation is critical). Unfortunately, while I don't see management too much "on the ball", I think the unions/union heads are really "off the ball". Recently (just a few months ago), I read the head of the APA stating that the previous head was "unrealistic" in many of his/unions demands. Really? Many of us have been stating this for years.   
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