mogandoCI
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RE: AMR Bankruptcy Court Thread

Tue Dec 27, 2011 6:02 pm

Quoting LAXintl (Reply 97):
In the motions is basically states its while foreign creditors represent a smaller grouping (15% of total), they are critical for ongoing operations and represent 40% of company revenues. Everything from foreign airspace and airport access, to fuel availability and vendor provided services could be compromised if AMR is unable to meet its obligations including payment of foreign taxes and fees (which its about $250mil in arrears already).
Any interruptions incurred by actions of foreign governments, companies or courts would diminish the value of the AMR estate and its key AA maintain its international operations on an uninterrupted basis.

If foreign aviation authorities or creditors aren't paid on time, do they have any right to impound AA aircraft until payments are made ?
 
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par13del
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RE: AMR Bankruptcy Court Thread

Tue Dec 27, 2011 6:56 pm

Quoting mogandoCI (Reply 100):
If foreign aviation authorities or creditors aren't paid on time, do they have any right to impound AA aircraft until payments are made ?

I would say yes, however, they would first have to file a legal claim for non-payment and have their legal authorities issue a lein, such legal action would be outside the US Chpt.11, but definatly as a result of.
Additionally, such things are usually in contracts and take some time.
 
FlyASAGuy2005
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RE: AMR Bankruptcy Court Thread

Tue Dec 27, 2011 7:24 pm

Quoting mogandoCI (Reply 100):

Id guess yes. Look at TLV. The government said they will seize AA assets if they don't pay up on what's owed to facilities and employee bbefore they can land any a/c there again. I don't know of the exact figure but it would hv to be paid before they resume service.
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LAXtoATL
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RE: AMR Bankruptcy Court Thread

Tue Dec 27, 2011 8:05 pm

Quoting mogandoCI (Reply 100):
If foreign aviation authorities or creditors aren't paid on time, do they have any right to impound AA aircraft until payments are made ?

The short answer is yes. It is more complicated then that as there are many different laws and various legal systems in different countries, but the bottom line is that US bankruptcy law applies to the U.S. citizens and corporations, so if the laws in another country do not recognize US bankruptcy protection laws then assets can be seized and there is nothing a US bankruptcy court could do about it. That being said, I highly doubt AA would continue operations anywhere where they were exposed to imminent seizure, so the likleyhood of it happening in this case are remote (and I think their biggest concern is their foreign fuel suppliers, I think they are more concerned with having their fuel supply cut off than a seizure of aircraft or other assets)
 
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RE: AMR Bankruptcy Court Thread

Tue Dec 27, 2011 10:44 pm

Quoting LAXtoATL (Reply 103):
The short answer is yes. It is more complicated then that as there are many different laws and various legal systems in different countries, but the bottom line is that US bankruptcy law applies to the U.S. citizens and corporations, so if the laws in another country do not recognize US bankruptcy protection laws then assets can be seized and there is nothing a US bankruptcy court could do about it. That being said, I highly doubt AA would continue operations anywhere where they were exposed to imminent seizure, so the likleyhood of it happening in this case are remote (and I think their biggest concern is their foreign fuel suppliers, I think they are more concerned with having their fuel supply cut off than a seizure of aircraft or other assets)

ALL the USA airline that have gone Ch 11 have conintued their iternational ops, the foreign fuel, landing fees and other expenses have been paid so the airline can operate. The plane operating those flights have also had its payments made, rejecting a lease if far simpler; tell the bank to come and get it. I can't think of all the Ch 11 airlines in the USA when a Plane was ever seized by the leasing firm or the bank.
 
dirtyfrankd
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RE: AMR Bankruptcy Court Thread

Tue Dec 27, 2011 11:57 pm

Quoting FlyASAGuy2005 (Reply 102):
Id guess yes. Look at TLV. The government said they will seize AA assets if they don't pay up on what's owed to facilities and employee bbefore they can land any a/c there again. I don't know of the exact figure but it would hv to be paid before they resume service.

AA doesn't fly on its own metal to TLV...
 
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LAXintl
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RE: AMR Bankruptcy Court Thread

Wed Dec 28, 2011 12:49 am

Quoting AeroWesty (Reply 98):
Interesting that one of the motions was to get a 45-day extension for reporting cash management activity. The only time I ever worked on a Christmas Day was when a company I worked for in the 80s filed BK the day before Thanksgiving. Our first cash mgmt. report was due Dec. 26th, and our lawyers said to make the deadline with no excuses, whatever the cost in terms of overtime, holiday pay, or inconvenience to staff.

Indeed. Dont want to delay or bring on the ire of the court due to lack of timeliness in filing required reports.

Quoting mogandoCI (Reply 100):
If foreign aviation authorities or creditors aren't paid on time, do they have any right to impound AA aircraft until payments are made ?

Sure. They can follow their own legal process and win a judgement against AMR.

As the carriers court filings make clear it does not want to tangle with foreign courts as well and wants to ensure business relations continue uninterrupted and don't create distraction for its US reorganization filing.

Quoting dirtyfrankd (Reply 105):
AA doesn't fly on its own metal to TLV...

Yes and thats for a reason.

Essentially there is a bounty out for AA in Israel due to the manner TWA takeover went down with employees failing to receive required severence payments. They sued and won a judgement against AA.
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FlyASAGuy2005
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RE: AMR Bankruptcy Court Thread

Wed Dec 28, 2011 1:05 am

Quoting dirtyfrankd (Reply 105):

Well, that's exactly what I said and its for a reason. See the above responce.
What gets measured gets done.
 
crAAzy
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RE: AMR Bankruptcy Court Thread

Wed Dec 28, 2011 2:11 am

Quoting LAXintl (Reply 106):
Essentially there is a bounty out for AA in Israel due to the manner TWA takeover went down with employees failing to receive required severence payments. They sued and won a judgement against AA.

It was my understanding that this amount, while millions of dollars, was not significant enough so that if AA ever did choose to enter back into the TLV market it would not be a barrier to entry.

I think it goes back to the AA philosophy that they just don't want anything "Big and shiny with the words American" flying into certain areas of the world.
 
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LAXintl
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RE: AMR Bankruptcy Court Thread

Wed Dec 28, 2011 2:55 am

A story from back in the day....

American Airlines issued a response on March 8 which confirmed the planned suspension, and added: "Recent speculation from some parties has suggested that TWA's Tel Aviv flight has been profitable for the last two years. Although American has not yet seen TWA's detailed financial information about this flight, TWA has informed the company that its service to Tel Aviv has lost money in each of the past two years. Although many of TWA's flights to and from Tel Aviv have-until recently-operated at above average load factors, the unusually high cost structure and low fares associated with this flight made it unprofitable.

"In addition, American reviewed Israeli employment law and TWA's severance obligations to its employees," the written response added. "If American began operating TWA's service to Tel Aviv, American might be expected to take on TWA's obligations to pay severance to its employees, which could total as much as $9 million to $18 million. Combined with the other market factors, this presented an unacceptable risk for the airline."



The initial tab ended up being $13 odd mil, however as time dragged on without the payment the workers won further judgment for interest and additional penalties. Even the Israeli transport ministry and Knesset committees have called on sanctions against AA to help recover the judgement.

Anyhow – there is money to be made in Israel – only in 2009, Larry Kellner of CO said the following –
Company chairman Larry Kellner said on his first visit to the Jewish state "the airline's 14 weekly flights bring 400,000 people in and out of Israel annually". Kellner stated that "the Israeli operations are among the most profitable routes for Continental", the world's sixth largest airline.
He added that "Continental attracts a large number of banking and finance executives, as well as tourists to the route".



Me says that $13+mil which has now been languishing for almost 10-years and growing is too high hurdle for AA to overcome financially if they were to return and launch an Israel route. It would take a long time to amortize such a large upfront charge and likely render a service loss making for extended period.

In the mean time DL, UA, US can enjoy the Israel market.
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LAXtoATL
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RE: AMR Bankruptcy Court Thread

Wed Dec 28, 2011 3:32 am

Quoting jfk777 (Reply 104):
LL the USA airline that have gone Ch 11 have conintued their iternational ops, the foreign fuel, landing fees and other expenses have been paid so the airline can operate. The plane operating those flights have also had its payments made, rejecting a lease if far simpler; tell the bank to come and get it. I can't think of all the Ch 11 airlines in the USA when a Plane was ever seized by the leasing firm or the bank

I am aware of this. But the question that was asked by mogando was IF they didn't make their payments on time could foreign entities have the right seize to assets, which of course they do (based on local laws) - and it is why AMR is asking the court for permission to expedite payments to their foreign creditors so that they can continue operations as normal what you are addressing and what was asked are two completely different things. Filing chapter 11 bankruptcy provides protection from creditors, but it does not extend to countries that don't recognize US bankruptcy laws - as far as they are concerned it is business as usual (in the US AMR can stop making or delay payments to its creditors without reprecussion because they are protected by the bankruptcy court from having its assets seized or services cut off, but they do have that same protection outside the US).
 
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RE: AMR Bankruptcy Court Thread

Wed Dec 28, 2011 5:48 am

Quoting LAXintl (Reply 109):
"In addition, American reviewed Israeli employment law and TWA's severance obligations to its employees," the written response added. "If American began operating TWA's service to Tel Aviv, American might be expected to take on TWA's obligations to pay severance to its employees, which could total as much as $9 million to $18 million. Combined with the other market factors, this presented an unacceptable risk for the airline."

Assuming that TW had just one flight a day to TLV, how can employees who work four hours a day claim anything? and how is it even possible that they're owed pensions? Where i'm from if you work less than 32 hours a week, you're entitled to......nothing. Is Israel that different?

It just seems strange to me that employees who work part time can go court and claim any kind of benefits at all, let alone 9 million! It makes no sense.
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crAAzy
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RE: AMR Bankruptcy Court Thread

Wed Dec 28, 2011 6:50 am

Quoting LAXintl (Reply 109):
Me says that $13+mil which has now been languishing for almost 10-years and growing is too high hurdle for AA to overcome financially if they were to return and launch an Israel route. It would take a long time to amortize such a large upfront charge and likely render a service loss making for extended period.

Good to know and thanks for keeping this thread updated! It makes things so much easier to follow.

The history is interesting. You also have to wonder about opportunities lost with AA in TLV ... you would think that AA's cornerstone hub strategy with LAX, ORD, JFK, MIA would be ideal for TLV connections. Not sure about DFW. Wonder if AA could do anything in BK to get this issue settled once and for all. (Realizing it's a foreign country and BK rules don't apply but suggesting AA try to negotiate a settlement if they are still carrying the debt obligation on their books)
 
n318ea
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RE: AMR Bankruptcy Court Thread

Wed Dec 28, 2011 12:11 pm

+1 for Employees as BK Judge is not Burton Lifland.
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LAXintl
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RE: AMR Bankruptcy Court Thread

Wed Dec 28, 2011 4:46 pm

Quoting NorthstarBoy (Reply 111):
Assuming that TW had just one flight a day to TLV, how can employees who work four hours a day claim anything? and how is it even possible that they're owed pensions? Where i'm from if you work less than 32 hours a week, you're entitled to......nothing. Is Israel that different?

It just seems strange to me that employees who work part time can go court and claim any kind of benefits at all, let alone 9 million! It makes no sense.

Lets not go off topic as this is a thread is about AA BK process, however I feel its important I answer your false notion.

Firstly TWA served Israel for over 50-years. It had an employee base over some 100 which included everything from airport employees, city ticket office, sales/marketing, reservations, maintenance etc. It was not some small part-time station. Many of the staff had accrued 20-30 years with TWA at the shut down. Israeli labor law (as do many other nations) call for severance payments for staff cut. In this case it was one-months pay for each years of service, which totaled $13 odd million at the time.


Quoting crAAzy (Reply 112):
Wonder if AA could do anything in BK to get this issue settled once and for all. (Realizing it's a foreign country and BK rules don't apply but suggesting AA try to negotiate a settlement if they are still carrying the debt obligation on their books)

As I recall AA did make an offer to settle - something grossly inadequate like only 1-month pay total for each employee.

And yes, I agree with you. AA has missed out on a good market from its corner stones. For example excluding Canada and Mexico/Carrib destinations, Tel Aviv is the 5th larges foreign market from NYC.

Quoting crAAzy (Reply 112):
thanks for keeping this thread updated! It makes things so much easier to follow.

Thanks. Yes I thought having a thread about the BK itself would be a good forum and avoid all the miscellaneous other topics.

=
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masseybrown
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RE: AMR Bankruptcy Court Thread

Wed Dec 28, 2011 5:28 pm

Quoting LAXintl (Reply 114):
Lets not go off topic as this is a thread is about AA BK process

   If you can keep this thread narrowly focused, I will nominate you for a Nobel Prize.

The mansion in London was fun. Corporations of AMR's age have generally accumulated tons of dubious assets that are 'essential' until the money runs out. It will be interesting to see what their miscellaneous disposals amount to.
 
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RE: AMR Bankruptcy Court Thread

Wed Dec 28, 2011 9:16 pm

"On another note I'm thinking AA will be a very strong competitor if alone or stronger and bigger if merged taken over. What are your thoughts."

I am thinking that if AA does not merge (or get taken over) they will be significantly smaller as the reduce the MD80 fleet quicker than they take on new aircraft.

If they do not merge I could see the following:

SJU down to hub flying

LAX flying reduced

JFK/LGA domestic flying reduced

ORD flying reduced making them less relevant because of the giant UA hub next door

Over course, some of those reductions can be filled in quickly by a regional picking up routes. I do NOT think that regional will be Eagle



Tough times ahead and I don't think a lot of us will like what happens
 
ckfred
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RE: AMR Bankruptcy Court Thread

Wed Dec 28, 2011 9:55 pm

Quoting jfklganyc (Reply 118):
ORD flying reduced making them less relevant because of the giant UA hub next door

I can't see AA reducing ORD flying. AA picked up a fair amount of corporate flying in 2000, after the UA pilots staged their sick-out. To reduce ORD is simply handing over business to UA. Assuming that AA can get flying with either the larger Embrears or the Canadair C-Series (either by favorable pay rates for mainline or changes in the scope clause) and replacing a large chunk of the MD-80 flying with A319s, AA would have a fleet much better suited for competing in Chicago, both with UA and WN.
 
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RE: AMR Bankruptcy Court Thread

Wed Dec 28, 2011 10:36 pm

Quoting caliboy78 (Reply 116):
What I like to know on a serious note is. What are the odds of a takeover or merger at AA. What would allow it to happen and who has the last word on it.

On another note I'm thinking AA will be a very strong competitor if alone or stronger and bigger if merged taken over. What are your thoughts.

The obvious is US, while some wish it were B6 that's not happening without a healthy AA making the overtures. B6, while a very successful company, cannot acquire AA and successfully re brand the combined carrier in their own image. US has the executive talent, experience, and most importantly Wall Street fan club to support a merger should they make the attempt.

On a personal level, I just flew US Airways with my wife and my brother this past week (first time in a long time) . They are novices compared to yours truly when it comes to the in's and out's of the airline industry, however they noted that US Airways was on a much different (lower) level when compared to CO, UA, DL etc.. we usually fly. While the flights were on time, they found the planes (757, 767-200) old and the employees somewhat indifferent and the service lacking.

I fear that a AA/US merger would only serve to create a larger version of US.
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boeing773er
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RE: AMR Bankruptcy Court Thread

Wed Dec 28, 2011 10:49 pm

Quoting STT757 (Reply 118):
While the flights were on time, they found the planes (757, 767-200) old and the employees somewhat indifferent and the service lacking.

Well, just because 36 of the 340 planes that US does operate may be considered "old" that is no way to consider the entire fleet.

And I flew on US last month and I felt like the cabin crew were polite and professional as CO or UA.
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LAXintl
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RE: AMR Bankruptcy Court Thread

Wed Dec 28, 2011 10:56 pm

AA will almost certainly get various forms of merger, asset sale, and divestiture offers while in BK.

Tom Horton's letter to employees said this straight out.

Now that they are in BK, the divergent interest of the court, investors, and creditors will help shape what a future AMR entity looks like. And these interest might not be mutually concurrent with what AA management itself might desire.
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dirtyfrankd
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RE: AMR Bankruptcy Court Thread

Thu Dec 29, 2011 9:09 pm

Quoting FlyASAGuy2005 (Reply 107):

Aah my mistake, what I meant to say is that AA had never flown on its on metal to TLV, I didn't realize this was caused by the TWA acquisition. Thanks for the info, learn something new every day here.
 
SATexan
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RE: AMR Bankruptcy Court Thread

Fri Dec 30, 2011 4:12 pm

Expected Development: AMR Shares to be dropped from NYSE trading....

http://www.boston.com/business/artic...s_to_be_dropped_from_nyse_trading/
 
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RE: AMR Bankruptcy Court Thread

Sat Dec 31, 2011 12:19 am

Quoting coopdogyo (Reply 2):
Quoting coopdogyo (Reply 2):
HP and AA have quite a close relationship. In 2009 HP and American teamed up to develop a reservation systems. HP must have provided financing as part of the the deal which is why they are on the list of largest creditors.

Sabre was developed by/jointly between American and IBM in the 1960s. Sabre was spun off as a separate company and American and Sabre were wholly owned by AMR. Sabre was eventually sold to EDS, EDS was then purchased by HP. When American started looking for a partner for a new reservations system they went to HP - owner of EDS/Sabre. I think that's the transition - I could be mistaken.
 
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LAXintl
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RE: AMR Bankruptcy Court Thread

Tue Jan 03, 2012 4:45 pm

A single docked item is scheduled for court this week.

o Authorization to enter into agreements to employ over 300 US and foreign companies and individuals to serve as professionals advisers on the ongoing case in the fields litigation, regulatory, environmental, securities, compensation, antitrust, international law, corporate transactions, intellectual property, tax, real estate, immigration, and labor and employment matters not to exceed $500,000 in services for each.


In other news, the creditors committee will be holding a full meeting on January 19th.


The next schedule court date planned is January 27th, with docket that should be much fuller.
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LAXintl
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RE: AMR Bankruptcy Court Thread

Thu Jan 05, 2012 5:18 pm

As part of its preparation for the January 27th hearing, American Airlines filed documents with the court that it will accept and continue to lease 47 CRJ700 aircraft (ships 500-546) as part of section 1110 of the bankruptcy code.

To cure its previous payment default covering 19 of these aircraft, carrier will make up outstanding payments of $10.2mil to their owners by the 27th.
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commavia
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RE: AMR Bankruptcy Court Thread

Thu Jan 12, 2012 12:32 am

TheStreet.com published an article today that included quotes from an interview with Laura Glading, President of the APFA (AA's mainline flight attendant union) and a member of the AMR bankruptcy creditors committee. Some excerpts I found particularly interesting/notable:

Quote:
The committee includes three union representatives; three banks; Boeing, Hewlett-Packard and the Pension Benefit Guaranty Corp. "It's a very good balance," says Glading in her first extensive interview since the filing. "We made an early decision that we would try to make recommendations based on consensus."

Will be interesting to see how long this sense of unity and consensus lasts on the creditors committee, considering that some of the committee members' interests are at least somewhat conflicting. She does goes out of her way to say on multiple occasions how deeply invested all stakeholders - including labor - is in seeing AMR succeed, but she also calls for a restructuring plan based on "balanced and shared financial sacrifices" on stakeholders. We'll see how that works out.

Quote:
Glading realizes that US Airways could one day seek to make a case to the committee for a merger. "If they come in, they will have to present a business plan that shows that American Airlines will be more successful with US Airways than as a stand-alone," she says. "It will depend on that." Glading noted that six years after a merger between US Airways and America West, the two pilot groups still work under separate contracts. "There is always some skepticism because [US Airways] hasn't successfully merged East and West, so how is it that they think they can make this one work?" she asks.

Well I think she just about as good as came out and said what we have all long suspected: AMR's unions are obviously going to be highly suspicious and cautious about any merger proposal from USAirways, for obvious reasons. Labor integration at USAirways has been extremely messy, and redoing that entire process over again with another airline that is substantially larger even than the combined USAirways would likely be a sight to behold - and not in a good way.

Quote:
"I don't see that the flight attendants have anything left to give," she said. "In 2003 we went through a virtual bankruptcy. we gave then, and that was supposed to be enough." Now, according to APFA compilation, American flight attendant compensation is in the middle of the pack. That was before United and its flight attendants this week reached a tentative deal on a contract with a $5,000 signing bonus and wage increases of 10% on the date of signing and 18% over the following four years.

This seems to just continue the AA unions' disconnect from reality and intentionally-myopic view of labor cost that has been so pervasive and counterproductive over the last few years. For understandable and self-evident reasons, the politicized labor unions seem to way to keep going back to base hourly pay as a measure of labor cost. Glading (and she's hardly alone) seems to contend/imply that since the base hourly pay of some of AA's employees is today lower than at some of AA's post bankruptcy competitors, AA's labor costs are lower and thus AMR's restructuring shouldn't fall "on the backs of labor." The reality, of course, as she well knows, is far more complicated and nuanced.

In reality, hourly pay is just one component of labor cost. Productivity, work rules, pensions, healthcare and retirement benefits are just some of the other areas of major cost that Delta, Northwest, United and USAirways were able to substantially reduce through the bankruptcy process. And that's while ignoring the huge flaw in even that logic, which is of course the even higher productivity, even more flexible work rules, total lack of defined benefit pensions, and even slimmer healthcare and retirement benefits present at many of the low-cost and regional airlines with which AMR (mainline and Eagle) are now increasingly competing.

It is fair to say - even though Glading doesn't, at least not directly - that the flight attendants are just about the smallest piece of this cost problem from a labor perspective. They are the largest labor group, and they do all have pensions of course, but much of the union-contract-driven inefficiency and competitive disadvantage that has hampered AMR to date has far more to do with the other groups - including the TWU and especially the pilots - and much less about the flight attendants. Flight attendants are largely just a direct function of capacity, especially now that, on the vast majority of AA flights, cabins are already staffed at FAA minimums. Thus, I think it's safe to guess that cost reduction from the APFA is going to fall far less on hourly wages, and more on pensions and some work rule changes. The real fundamental business-model-changing heavy lifting on labor costs is going to have to happen with the TWU and the APA.

Quote:
One way American could cut flight attendant costs is to encourage retirements by assuring post-retirement health and pension benefits, Glading said. The average age of the 16,000 union members, including about 1,000 inactive members, is 51. No one has been hired since April 2001, average seniority exceeds 20 years, and 77% of the group is at the top of the 15-year pay scale. "It's not in the best interest of the company to have an aging workforce at the top of the pay scale," Glading said. "It would be best to offer packages to give people the comfort and security they need in retirement."

I also agree with Glading on this. The vicious death spiral of higher costs leading to capacity cuts leading to layoffs leading to an ever-older-workforce under the U.S. seniority-based union system has been well discussed, but nonetheless it does remain a chronic and serious problem for AMR. I thought her statistics were extremely interesting - it was fascinating to see these numbers (which anyone who flies AA regularly could already have surmised) quantified - average age is 51, 77% are topped out on pay scale. Wow! Again - not surprising, but still stark to see.

Glading is right on that some form of labor buyout may well be an NPV-positive avenue of cash deployment for AMR going forward. I have no idea if the APFA's calculation of future savings is reasonable, as we don't know what assumptions they used, but I think - for better or worse - it stands to reason that AA has a huge financial incentive to, one way or another, get the oldest, most senior, and highest-paid employees (not just flight attendants) off the payroll if possible. Sad/harsh to say, but reality.
 
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RE: AMR Bankruptcy Court Thread

Thu Jan 12, 2012 12:54 am

Quoting commavia (Reply 126):
that the flight attendants are just about the smallest piece of this cost problem from a labor perspective.

Due to the pension and other benefit costs, I do not think they are a small piece. I believe the work rules and such have made the F/A's a big part of the problem. I would love to see a labor cost breakdown comparing B6 and AA. I'll agree hourly pay isn't a huge part of the problem.

Quoting commavia (Reply 126):
"It would be best to offer packages to give people the comfort and security they need in retirement."

Where is the money going to come from? Some buyout is reasonable. But which side will consider it reasonable?

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LAXtoATL
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RE: AMR Bankruptcy Court Thread

Thu Jan 12, 2012 1:01 am

Quoting commavia (Reply 126):
Will be interesting to see how long this sense of unity and consensus lasts on the creditors committee, considering that some of the committee members' interests are at least somewhat conflicting.

I think it will last. Considering that the new bankruptcy rules have shortened the process it is in everyone's interest to move as quickly as possible and limit the infighting. Given how large a presence labor has on the committee plus the PBGC, labor will def be a big voice that cannot be ignored - the committee will work hard to come up with solutions that might not be please everyone but that will be fair and agreeable to everyone. As mentioned in the article, AA mgmt will also need to work with the committee to formalize their plan, if they try to unilaterally come with a plan without getting input and feedback from the committee, it will drag the process out and make it more contentious than it needs to be.

This following quote from the same article I found interesting: "The bankruptcy filing has brought mounting awareness that American's problems result not only from its costs, but also from a revenue differential."
It was widely assumed that AA was still generating a revenue premium to their competitors and that their only problem was costs. If they have a cost problem and a revenue problem, their are definitely more underlying problems that lead to that situation. Be it network or fleet or poor management or whatever, AA will have to do more than simply cut costs as part of the solution.

Also from the article: ""We're very concerned that American will start cutting routes," (Glading) said. "Our fear is that with Delta and United in such an aggressive mode, cutting is not the answer. American needs to grow and compete. They need to figure out what are the best routes, the strongest routes and the best network to be positioned for expansion and competition.""
I don't know what Glading is smoking if she thinks AA can grow and compete with DL and UA. As long as DL and UA are on solid financial ground and AA is struggling, growing and taking them on head to head will only make the situation worse. Now I do agree with the second part of her statement, but AA will need to shrink, gets in financial situation under control before they should look at growth, but they definitely need to figure out which routes are the best and fine tune their network in order to be suited for expansion and competition (but that expansion and competition should be at least 2 years from now, roughly a year out of bankruptcy).
 
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RE: AMR Bankruptcy Court Thread

Thu Jan 12, 2012 1:07 am

Quoting lightsaber (Reply 127):
Due to the pension and other benefit costs, I do not think they are a small piece. I believe the work rules and such have made the F/A's a big part of the problem. I would love to see a labor cost breakdown comparing B6 and AA. I'll agree hourly pay isn't a huge part of the problem.

I'm not so sure. When I look at the overall structural labor cost disadvantage AA faces today relative to its competitors - encompassing not just direct hourly wages but also the inefficiencies built into the union contracts, and the opportunity costs of missed opportunities driven by contract inflexibility - I see the flight attendants as being a relatively smaller piece of that.

Quoting lightsaber (Reply 127):
Where is the money going to come from? Some buyout is reasonable. But which side will consider it reasonable?

There are AA flight attendants here on A.net. They could answer that question. I can't.

Glading seems to intimate that stabilizing and continuing to promise people a pension and retiree medical will be enough to get people to retire. I disagree. AA's flight attendants have had that "guarantee" for the last ten years, and it doesn't seem to have incentived large (or at least large "enough") numbers to retire as the work group (overall) has aged.

Nonetheless, at least based on all the comments I hear from flight attendants I know, I believe there is definitely some 'tipping point' - some number - at which AA could see a huge number of flight attendants walk out the door. Now sure, there are some of the incredibly senior flight attendants who stick around now for the healthcare and pension, and hardly work, and that is - again - something else AA is going to have to address as they work through the union contracts. But still, with the right package structured in the right way, I think AA could put a major dent in the topped-out, overly-senior workforce that the last decade of layoffs and capacity cuts has produced.

And since the flight attendants are, comparatively, cheaper and faster to train than maintainers or pilots, it may well be in AA's interests to explore such an option.

Quoting LAXtoATL (Reply 128):
It was widely assumed that AA was still generating a revenue premium to their competitors and that their only problem was costs. If they have a cost problem and a revenue problem, their are definitely more underlying problems that lead to that situation. Be it network or fleet or poor management or whatever, AA will have to do more than simply cut costs as part of the solution.

It was not "assumed" - it was calculated. AA was, for quite some time, generating a revenue premium relative to competitors. And, indeed, AA still is in some areas. But, that revenue advantage has diminished in the last several years as AA's competitors have bulked up and rationalized their networks, and AA has continued to cut and weaken their network because of their structural cost problem.

A lack of investment from AA in several key areas - ranging from technology to distribution to inflight product to product monitization - has also put them at a unit revenue generation disadvantage relative to competitors, but bankruptcy should finally free up the resources for those investments, and the new aircraft should also do wonders in improving the revenue-generating potential of AA's assets and network.

Finally, AA is also several years behind their two main competitors - Delta and United - in fully harnessing the power and potential of joint ventures.

Quoting LAXtoATL (Reply 128):
Also from the article: ""We're very concerned that American will start cutting routes," (Glading) said. "Our fear is that with Delta and United in such an aggressive mode, cutting is not the answer. American needs to grow and compete. They need to figure out what are the best routes, the strongest routes and the best network to be positioned for expansion and competition.""
I don't know what Glading is smoking if she thinks AA can grow and compete with DL and UA. As long as DL and UA are on solid financial ground and AA is struggling, growing and taking them on head to head will only make the situation worse. Now I do agree with the second part of her statement, but AA will need to shrink, gets in financial situation under control before they should look at growth, but they definitely need to figure out which routes are the best and fine tune their network in order to be suited for expansion and competition (but that expansion and competition should be at least 2 years from now, roughly a year out of bankruptcy).

AA won't be growing until they get their costs competitive. Again - this gets back to the death spiral. Too-high costs (including, but not limited to, labor) drive capacity reductions, which elevates marginal costs still-higher, which leads to more capacity reductions, and on and on. The cycle has to stop - and bankruptcy should achieve just that. With costs that are going to be competitive, and with a business model sufficiently flexible and nimble to respond to an evolving market, AA should have no problem growing, competing and succeeding.

[Edited 2012-01-11 17:13:38]
 
masseybrown
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RE: AMR Bankruptcy Court Thread

Thu Jan 12, 2012 5:44 am

Quoting LAXintl (Reply 124):
The next schedule court date planned is January 27th, with docket that should be much fuller.

An earlier post of LAXIntl noted that AMR requested an extension of the period during which they could reject aircraft leases. Did they get that permission?

If not, the Jan 27th hearing marks the end of the 60-day window to reject leases. If the aircraft plans become clear at that time, future scheduling plans should become more obvious as well.

I was surprised they asked for the extension. That would indicate a serious lack of pre-declaration planning - another mistake to pin on Arpey and another indication to me that he was asked to leave on very short notice.
 
miaami
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RE: AMR Bankruptcy Court Thread

Thu Jan 12, 2012 4:05 pm

 
bmibaby737
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RE: AMR Bankruptcy Court Thread

Thu Jan 12, 2012 7:02 pm

If I'm reading these documents correctly, then it means HSH Nordbank owns, and leases to AMR, N943AN, N928AN and N783AN... and that Bombardier Capital Inc, lease all the CRJ700s to AMR.

Is it likely such information will appear for the rest of the fleet? I find it quite interesting to see who owns what aircraft.
 
KarlB737
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RE: AMR Bankruptcy Court Thread

Thu Jan 12, 2012 10:18 pm

Courtesy: The Wall Street Journal

American Airlines Updates Employees on Bankruptcy Plan

"Horton tells employees that American is negotiating to cut its debt load and junk its older planes, and is working on proposals to rework its union contracts. The company said its restructuring plan isn’t fully baked yet, but Horton says the “business plan and labor proposals will be coming together within the next few weeks.”

http://blogs.wsj.com/deals/2012/01/1...s-on-bankruptcy-plan/?mod=yahoo_hs
 
PlaneAdmirer
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RE: AMR Bankruptcy Court Thread

Thu Jan 12, 2012 11:24 pm

Quoting miaami (Reply 131):
Here is some news on the aircraft leases

http://aviationblog.dallasnews.com/a....html

From the link: The airplanes were financed or leased through the "American Airlines 13.0% 2009-2 Senior Secured Notes Due 2016 Aircraft Equipment

Wow!! Paper originated in 2009 that has a face of 13%. I wonder if they will be able to get that rate down.
 
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LAXintl
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RE: AMR Bankruptcy Court Thread

Fri Jan 13, 2012 7:14 am

Quoting MasseyBrown (Reply 130):
An earlier post of LAXIntl noted that AMR requested an extension of the period during which they could reject aircraft leases. Did they get that permission?

Yes they did.

Matter of fact to such end, AMR will be presenting the court on the 27th with request to retain SkyWorks Capital to aid with fleet asset management. SkyWorks will be tasked with working through AA fleet portfolio and coming up with financial options. Interesting part of the proposed deal is that Skyworks would receive a percentage gross transaction fee commission on savings it manages to generate for AMR.


As the 27th date gets closer, and the court docket fills up, I'll be providing an update in coming weeks.
From the desert to the sea, to all of Southern California
 
flyinryan99
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RE: AMR Bankruptcy Court Thread

Fri Jan 13, 2012 3:44 pm

American hasn't put out their spring/summer schedules (for the most part). Does anyone know when they plan on publishing it yet? I would think the April schedule should come out pretty soon.
 
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LAXintl
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RE: AMR Bankruptcy Court Thread

Sat Jan 21, 2012 7:52 pm

This coming week AMR heads back to court. Quite a large docket of items if scheduled to be heard:


o Authorize the establishment for procedure to protect value of future net-loss carry-forward tax credits and to protect them as property assets of the estate.
o Approving proposal for AMR to make cash deposit payments as insurance collateral to insure the uninterrupted supply of utility services including phone, electricity, gas and water. Also prohibiting utilities from refusing, discontinuing or discriminating against the debtor during the Ch11 process.
o Approval to honor existing payment and processing agreements with consumer credit card and e-payment issuers, including Citibank for co-branded AAdvantage credit card.
o Lifting stay and granting Travelport LP and Sabre Holdings authority to pursue its claims against AMR in Federal District Court.
o Lifting stay and allowing 11th Circuit to continue hearing pending case against AA Pilot Retirement Benefits program regarding denial of claims from 2008-2011.
o Retention of Rothschild Inc banking group as master financial advisors and investment banker during Ch11 case. Since 2006 Rothschild has served as advisor to AMR in various capacities and is well versed with the evaluation of issues faces by the company. Rothschild will receive a minimum monthly fee, $15mil case completion fee, plus between 1-3% fee on any new debt raised.
o Lifting stay and allowing Cantor Fitzgerald & Co and others to continue litigation against AMR related to events of 9/11 as per the Congressional Air Transportation Safety and Stabilization Act
o Application by American Eagle to retain Bain & Company as strategic consultant including provide a labor-cost assessment to aid with corporate reorganization process at Eagle.
o Application by American Airlines to retain SkyWorks Capital LLC as aircraft and fleet restructuring advisor. SkyWorks would serve as advisors assisting AA in respect to managing existing debt, lease obligations, maintenance status, market valuation while providing board level strategic insight and assist AA define fleet strategies. 15-month contract would including a gross transaction fee on aircraft savings generated.
o Application to retain Perella Weinberg Partners as advisors with respect to labor agreements, pensions, and post-retirement plans.
o Application to employ McKinsey & Company US and Japan for broad management consulting services on industry operational and organizational matters including evaluation of future business plans and forecasting for a 5-year period.
o Authority to retain Ernst & Young LLP as ongoing auditor and tax advisors
o Establish process for compensation and reimbursement of expenses of approved professional service providers
o Application to retain Groom Law Group to serve as employee benefits advisor counsel
o Application to retain Debevoise & Plimpton LLP as counsel for aircraft related matters
o Application to retain Paul Hastings LLP as counsel on special labor matters
o Application to retain KPMG LLP and compliance and tax counsel
o Authorization to employ multiple firms used in the normal course of business to handle tax matters
o Application to retain Morgan Lewuis & Bockius LLP as special counsel for labor and employment litigation
o Application to employ Wel Gotshal & Manes LLP as special attorney on debtors protection and creditors rights matters
o Application to retain Deloitee Financial Advisory Services as consultants for bankruptcy related services in the areas of dealing with trading partners, cash management, communications, development of financial systems and procedures.
o Stay on excess of 200 proceedings related to injury or damage claims against AMR
o Extending time frame for filing of litigation claims against AMR until confirmation order date of Ch11 exit plan
o Rejection on leases on 17 aircraft and engines within 15-day of order granting such rejection (I posted tail numbers below).
o Further 30-day extension on deadline for AMR to file comprehensive schedule of assets, schedule of execuatory contracts and statement of financial affairs.


As follow up to some of the above topics, the flight attendants union APFA filed objections to the proposed retention agreements of Rothschild, SkyWorks Capital and Perella Wingberg Partners as being excessive and “without boundaries” and include fees without regard to outcome of the case including already stated objectives in making even deeper cuts on employee wages and benefits. Additionally TWU objected to American Eagle retaining Bain & Co as consultants based on unreasonable requested fees and the fact that Bain is already predisposed with “singular goal of extracting concessions” from AE employees based on its previous work for AMR


Rejected aircraft:

A300
N14077

B757
N611AM
N614AA
N617AM
N626AA
N627AA
N629AA
N631AA
N632AA
N641AA
N643AA
N648AA

MD-80
N578AA
N59423
N7538A
N9412W
N9413T
N9420D

=
From the desert to the sea, to all of Southern California
 
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par13del
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RE: AMR Bankruptcy Court Thread

Sat Jan 21, 2012 8:55 pm

Well at least we can clearly see who some of the prime beneficiaries of Chpt.11 filings are, lawyers and more lawyers.
I know that there are numerous issues to be resolved spread across multiple parties, but with so many firms, its hard to get a bulk discount on fees, the legal cost will no doubt be excessive.
 
FlyASAGuy2005
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RE: AMR Bankruptcy Court Thread

Sat Jan 21, 2012 9:24 pm

Quoting par13del (Reply 138):

That's always the running joke with the BK process. At the end of the day,, the true winners are the lawyers..
What gets measured gets done.
 
FlyASAGuy2005
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RE: AMR Bankruptcy Court Thread

Tue Jan 24, 2012 10:56 pm

Read today that AMR will be taking a $713M charge on their 2011 earnings to write down and properly reflect the true value of assests, mostly aircraft.

Fair use:

Quote:
AP reported that the company says that in connection with its fleet-update plan, it judged the useful lives of some of its planes including McDonnell Douglas MD-80s, Boeing 757s and Boeing 767s. “It decided that the value of the Boeing 757s it uses on U.S. routes was overstated, and it will take a charge to write down those and other durable assets to their true estimated fair values,” the story said.

So in essence, the "book" value of some of these 757s, 767s, and S80s was mcuh higher than reality. I guess this had to come out now as a/c has to be returned or sold so their "market" value has to be used and not what AMR felt it was worth. That's like if I have a list of assests and I list my 1999 Ford Ranger valued at $10,000 when in reality it's closer to $3,000. That adds to me net worth but when it comes time to sell the thing I should re-evaluate that $10,000 number to something closer to 3k.

Is this it in a VERY simplified form?
What gets measured gets done.
 
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ADent
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RE: AMR Bankruptcy Court Thread

Wed Jan 25, 2012 2:54 am

Quoting LAXintl (Reply 137):
This coming week AMR heads back to court. Quite a large docket of items if scheduled to be heard:

Thanx for posting these updates.
 
AADC10
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RE: AMR Bankruptcy Court Thread

Wed Jan 25, 2012 7:44 pm

Quoting cslusarc (Reply 96):
Why do some foreign creditors have priority over domestic creditors?

It depends on how or where the debt is collateralized. Some countries have different rules and make it easier to seize assets, particularly when the debt is payroll owed to employees in that nation.
 
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LAXintl
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RE: AMR Bankruptcy Court Thread

Wed Jan 25, 2012 11:26 pm

A few various bits of news related to the BK process.


Surprisingly to many AMR management on Monday came out with a letter to employees basically stating 98% of current employees and retirees would not see any changes or loose any of their accrued pension benefits regardless of what the company opts to do. The letter also insinuates the company might opt to freeze the existing plans, so that basically new hires would have to opt for something like a 401k instead.

Story and letter:
http://aviationblog.dallasnews.com/a...merican-airlines-to-employees.html


The US Trustees office will be objecting to some of the consultants and advisor's AMR seeks to employ. Essentially the US Trustee is asking the court to reject some of the proposed agreements based on grounds the requested scope of services are too broad without specific definition and could overlap while for others some of the contract terms and payment incentives go against established Bankruptcy Code Sections.


And lastly - AMR has requested a February 1 meeting with its unions. While not certain what it will discuss its quite possible the company might present the unions with its "wish list" of contractual changes prior to presentation in court which it had previous stated it was targeting for a February hearing.
From the desert to the sea, to all of Southern California
 
dirtyfrankd
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RE: AMR Bankruptcy Court Thread

Fri Jan 27, 2012 3:53 pm

I know it's a little early in the day but have there been any updates from today's bankruptcy hearing?
 
FlyASAGuy2005
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RE: AMR Bankruptcy Court Thread

Fri Jan 27, 2012 4:56 pm

Quoting LAXintl (Reply 143):

And what about the a/c write down. I was hoping someone could put that one in simple terms for me.
What gets measured gets done.
 
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LAXintl
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RE: AMR Bankruptcy Court Thread

Fri Jan 27, 2012 5:08 pm

Beyond today's hearing, AMR has scheduled 3 hearings next week to attend exclusively with aircraft matters.

Essentially the hearings are to inform the court that is continues to negotiate with owners or debt holders which have agreed to extent the 60-day Section 1110 decision requirement while negotiations continue. Parties will have right to give 10-days notice if they cannot come on new terms on the aircraft.

In summary AA has to date elected to retain 250 aircraft, continue negotiations over 106, and elected to reject 42 aircraft.
For AE, besides the few early ATR rejections, it has opted to keep all the CRJ700 while continue negotiating on the other 250+ ERJs and ATR aircraft.
From the desert to the sea, to all of Southern California
 
dirtyfrankd
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RE: AMR Bankruptcy Court Thread

Sat Jan 28, 2012 4:55 am

Alright so anyone know what happened today?
 
FlyASAGuy2005
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RE: AMR Bankruptcy Court Thread

Sat Jan 28, 2012 4:56 am

Would also like to know when Q4 and full 2011 results will be posted..if anyone has the date. I'm guessing it will be some time next week. Maybe Thursday?
What gets measured gets done.
 
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LAXintl
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RE: AMR Bankruptcy Court Thread

Sat Jan 28, 2012 9:28 am

Some news out of court on Friday.

AA was granted further 30-day extension delay in filing its required schedule of assets, contracts and statement of financial affairs to the court.

The decision to retain many of the proposed advisors by AMR was deferred to a late February hearing due to the multiple objections received by the court from various parties including unions, US Trustee and creditors committee.


In other news in regards to AMR's meeting with both AA and AE unions planned for February 1st, it has been confirmed that this will be the start of the section 1113 process whereby it will seek to amend CBA's. AMR is required to present a term sheet or essentially a "wish list" of desired changes and enter into good faith bargaining with its unions to reach consensual agreement prior to asking the court for any action.


And lastly - here is an open letter AA's pilot union the APA has issued to all AA customers.

ALLIED PILOTS ASSOCIATION ISSUES OPEN LETTER TO AMERICAN AIRLINES’ PASSENGERS: “WE ARE HONORED TO SERVE YOU

"The 10,000 pilots of American Airlines want to thank everyone who has chosen to continue traveling aboard our airline as we go through bankruptcy restructuring. We appreciate your business and will continue doing all we can to earn it.
"We are committed to achieving a successful restructuring and understand that a financially healthy company is a prerequisite to enjoying full, rewarding careers. As pilots, we're in a unique position to provide essential front-line leadership in American Airlines' day-to-day operations, and we will play a vital role in the airline's restructuring.

"This won't be the first time we've persevered in tough times. In the days after the 9/11 attacks when air operations resumed, our pilots returned to their cockpits without any assurance that the emergency security measures the industry deployed would prevent additional attacks. Hundreds of our pilots returned to military service to combat terrorism. On the financial front, to help prevent a bankruptcy filing by American Airlines in 2003, our pilots overwhelmingly approved billions of dollars in contract concessions that remain in effect today.

"Along with financial reforms, American Airlines' restructuring must also include a commitment by those who manage our company to cultivate a better corporate culture--a culture that values the crucial competitive edge that a fully engaged workforce provides. Whatever the industry, the best companies all have at least one element in common: highly motivated, enthusiastic employees who deliver exceptional service day after day. We stand ready to help create that same winning culture at American Airlines.

"Thank you again for choosing to fly American Airlines. We are honored to serve you."
From the desert to the sea, to all of Southern California

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