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Old 10-14-2020, 03:55 PM
Perennial Reserve
Excargodog's Avatar
Joined APC: Jan 2018
Posts: 8,848

Originally Posted by kaputt View Post
Clown post. Reeks of only thinly disguised rooting for an airline’s demise simply to have other people “feel the pain”.
I agree with Rickair above. Not rejoicing in anybody’s hard times, but those involved need to look realistically at future possibilities.

AA has over $40 Billion plus in debt. A lot of that was for fleet renewal- which was totally reasonable at the time. But when the pandemic hit and airlines folded all over the globe used aircraft became a glut and the value of the parked aircraft - even just for loan collateral, went down. Most recently AA raised money through a sale of junk bonds. They got the money, but wound up paying 12% interest for it, and more recently rating agencies have downgraded their bonds even more, with an outlook for further downgrading:


Fitch Downgrades American Airlines to 'B-'; Rating Watch Negative

Wed 30 Sep, 2020 - 5:38 PM ET

Fitch Ratings - Chicago - 30 Sep 2020: Fitch Ratings has downgraded American Airlines to 'B-' from 'B'. The downgrade is driven by a slower than expected rebound in air travel related to the coronavirus pandemic. The likelihood that air traffic will remain subdued for the next several years combined with American's heavy debt load create significant pressure on credit metrics throughout Fitch's forecast period. Reduced capacity to raise new capital as many of the company's previously unencumbered assets have already been pledged for secured financings also contributes to the negative rating action. The Negative Watch reflects the high degree of uncertainty remaining around the recovery in air traffic from the coronavirus pandemic and the possibility that American's cash flow and liquidity may come under further pressure in the next year absent a rebound in demand.
Now nobody is rejoicing in this because anything that adversely affects one pilot group ultimately affects us all, but it’s harder than h€|| to overcome a $40-45 billion debt while continuing to lose money and paying as much as 12% interest on borrowed money. So yeah, Chapter 11 is a real possibility and downsizing is almost inevitable. The career situation of everybody not already at a major has changed markedly in the past year and for those guys at AA wholly owneds changed a lot more.

For one thing AA - like the other two of the Big Three - retired many of their senior pilots:

These are the people that - a year ago - you could predict with certainty would be aging out of the pilot pool over the next five years who would ensure career progression for everyone behind them. That won’t happen now because they are already gone, albeit still costing AA 50 hours a month of their old pay in retirement. So there is that.Then they retired 80 mainline aircraft.

And then they furlough 1600 pilots.

You don’t furlough pilots if you are going to have any real use for them for 12-15 months because if you do it costs you more than you save. So basically, they are predicting they will need no additional pilots for over a year, and then they will start bringing the furloughed guys back onto a seniority list that is already stripped of many of its guys who were nearing mandatory retirement from flying, meaning it will likely be a slow slog just to get the furloughed back before they even start looking at regional guys, who by that time will be competing with a few thousand military pilots getting out.

That’s not wishing ill on any regional guys, that’s just reality. And if they do go through a bankruptcy there is a very real chance that additional pilots will be furloughed, further delaying new hiring.

And Delta and UA are likely not to be in a much better position - excepting less debt load - unless there is a surge in business and international flying that it doesn’t seem like anyone is expecting.

So yeah, grim words, but that doesn’t stop them from being the reality.
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