Opportunity Cost - AA vs UAL?
 

Been a commuter with AA for 27 months while living in CLT. Strongly considering moving to Denver for family reasons. Not thrilled with AA culture/debt and would certainly prefer living in base (still can’t hold CLT). Should I dust off my UAL app and forgo AA seniority accrued or suck it up and commute for the next 20 years? Thx all.

Culture doesn’t pay bills. Cross that off your list.

The debt is there for a reason and its not bc they can’t pay their bills. It’s a business, not personal finance. UA and DL will have significant capital expenditures coming up.

I’d stay. Don’t make an irrational, emotional decision.

Go. Living in base has value. I don’t think the culture will be all that different. Why stay here if you’re not happy.

I agree with mainline, but I’ll add that living in base is key. I can’t read the tea leaves, but I’d say you are pretty damn close to holding CLT.
That said, if Denver is where you need to be and UALs domicile is quick to hold, it doesn’t hurt to explore that option. Just try to do some homework on how many people would be above you trying to get to DEN

No one is arguing this is like personal finance. When the economy tanks again, that debt will be a significant noose around AA’s neck as revenues and profit fall. In bad economies airlines tend to use to debt to survive. Since AA may begin a recession with high debt loads that could be catastrophic for them.

DL, for one, is already in the middle of their fleet transformation and you don’t see the debt racking up at a significant rate.

That’s said, in the grand scheme of things, I think large piles of debt should be considered but not the number one reason for someone to bail from or avoid AA. I think, however, the OP is wise to factor it into his decision.


GP

You’re insane.

How long does it to take to get to the Denver domicile as a UAL new hire? I thought it was several years... seems like Denver is UALs equivalent to Charlotte, super senior and relatively stagnant. I’m sure someone from UAL could give you specifics. By the time you applied to UAL, got an interview, got hired, and started class... maybe add a year from now. So you’d give up 39 months at AA (holding CLT by then?) to start over, take a massive pay/seniority cut (you’re on the very early end of a massive wave at AA) and spend however long commuting from Denver to SFO/EWR? Oh, and you can’t reserve the jumpseat at UAL, so you’re competing with a ton of senior UAL pilots for a ride, and they can bump you off at that last minute if they choose. F that. Why not just move to Denver, stay with AA, and reserve a jumpseat to commute to LAX/PHX/DFW/wherever since you’ll be commuting anyway? Met a guy that commutes to DFW from ASE. Sounds miserable to me, but he loves it.

Perhaps consider SWA if you’re that set on Denver. A buddy of mine got there within a few months of finishing Indoc. You will certainly have missed the early part of the hiring wave at SWA, but it’s a great company to work for (supposedly) and has a great culture, whatever that means (just ask them), and you’ll never have to do another long training course after you get trained on the 737.

Isn’t it worth trying to work somewhere that you could be based where you want to live?

Good luck

What are you talking about? UA never had an entire fleet of planes that needed replacement like American did.

Wut? AA has replaced a much higher percentage of their fleet in recent years compared to UA/DL. That is the main reason for the debt load.

You should map out your seniority progression at AA vs UA. Take a look at your relative seniority every 5-10yrs. Taking into account the 3yr difference in hire date, I suspect your estimated career earnings will be significantly higher at AA.

Seniority and earnings are not necessarily correlated. For example many many FOs at DAL make more than the majority of Captains at AA. Our biggest failing as a pilot group has been comparing our hourly rates and assuming we are in the same ballpark as UAL DAL SWA FEDEX etc. Even JetBlue pilots have the option of dropping their lines and picking up at 200%.

Hopefully this all changes with the new contract. But I doubt it. Haven’t seen a single survey question cover double dipping, trip buys for OE, or 200% premium.

What is your tolerance for commuting? Some don't mind at all, some loathe it. Having done both throughout my career I'd rather switch companies and not commute. The drop in pay from starting over will be offset by the opportunities available living in base (Premium, OG, dropping trips for easy MU trips).
I moved to base last year. I had a pretty easy commute, 10 flights a day, 5 on us, usually Airbus. Loads were good, sat in the jumpseat less than 5 times a year. I spent 500 hours year getting to and from work. Seniority doesn't seem as important living in base. It doesn't really matter if my trips are commutable, doesn't matter if we get back late. I don't have to worry about weather the day my trip starts.
Reserve isn't so bad living in base.

Any data to back up this claim?

FWIW, I agree with most of what you said.

That, and after the merger, AA never seemed to make much of an effort to pay down debt.

It may be a competitive advantage..... if there is a huge downturn, AA will be the first into BK court to amend it's debt and rework it's contracts.

They’re paying off and have been paying off high interest debt. The low interest debt is what they’re not paying off. Why would they when they can make more money other places?

Just this week JetBlue has been offering lots and lots of premium pay, they definitely don’t have a problem opening their wallets to recover the operation when IROPs hit.

That being said, there might be a few things that JetBlue has that AA might not of it’s true your work rules are still largely from a BK contract. JetBlue’s contract is about 11 months old and Amendable in 2 years in 2021. After next year, 12 year A320 Captain at JetBlue will pay within $3/hr of 12 year AA A320 Captain. So hopefully not only will you guys knock it out of the park with your new contract with work rules but also move the goal post way down field for A320 rates so we will have something awesome to shoot for in 2021.

You sound like Doug at a crew news.

Mainline (cough Doug cough), do you have numbers on how much we’ve borrowed for new airplanes vs how much we’ve borrowed to buy back stock?

You sound like an Envoy new hire.

The smart FO’s at AA are making more than AA CA’s.

Total capex since the merger has been around $25b IIRC and total stock purchased has been $12b.

Assuming a rate of around 5%, that's around $50m a month in interest charges.

Denver at united is attainable with just six months seniority as long as you go for the 737/320. If you chase the 756 for some reason it would be two or three years minimum.

Dig the screen name.

Group IV I suppose.

Actually, there are quite a few G4 captains that went back to G2 Captains at least in MIA. With summer storms (Premium) etc they claim to make more.

Leave. I was ual for a short stint and there is a lot of better things in their contract. Less debt, more wb, making a great turnaround, denver base, forgetaboutit

The IMAX game works when you are senior on certain aircraft in certain bases. Not to mention you have to be willing to work hard for 10 months. It doesn’t compare to the flexibility and payouts at Delta and United.

After a decade of miserable commutes. Never again. Living in base is far more valuable for your sanity, time with family and massively improved scheduling flexibility.

AA has $7B+ in liquidity, that money is making considerably more than 5%.

What should concern all of us is the same thing that concerns all the Wall Street analysts...not debt but revenue.

In 2018 - Delta made 107% of AA's revenue - while only flying about 90% of the ASMs. That is what is driving the majority of the gap between AA and the industry.

Not quite. I have been with UAL for 8 months and can't quite hold Denver yet. Looks good for this fall so probably right at a year.

Do you (everyone, not specifically mainlineAF) think AA has a strong enough balance sheet to survive the next few years (I think they do)?

Over the next dozen years, will UA and especially DL have to replace their much older fleets (I think so)?

If so, all the majors will have lots of debt due to renewed fleets. At that point, having paid down part of their debt from earlier fleet renewal, AA will have the strongest balance sheet.

You are welcome to your opinion. But that is mine.

Denver and Colorado are going in a bad direction. Not to get political, but it is solidly controlled by one party now and they went on a rampage of bad legislation last spring. Denver has legalized psychedelic mushrooms and is actively trying to legalize heroin via shoot up clinics. The cost of living is rising fast and real estate is getting pretty expensive. Our one saving grace is our Taxpayer Bill of Rights (TABOR) which requires a vote of the people to raise taxes, unfortunately, they are doing everything they can to repeal it. They tried (but failed, thank god) to legalize camping in public spaces...they will keep trying.

Check out https://completecolorado.com/ to get up to speed before moving here.

If you are a progressive, then Denver is for you, if not, just be careful about moving here. Personally, I’d like to leave once my youngest graduates from high school.

I also think being Denver based at UAL, is similar to being CLT based at AA...slow movement.

Working from the baseline that you don’t wanna commute.....

Do you like living in CLT? If tomorrow you got awarded CLT, would you still want to move to Denver? If so, apply to UAL/SW and go if it will make you and your family happier. If/when they call, decide then. If you like CLT, then I’d stay at AA. You will get in. The dam showed a tiny leak on the last bid and it’s just a matter of time.

Personally, I put no faith in future projections 20 years out. Maybe they happen, maybe they don’t. Anyone who tells you otherwise is lying or guessing. Do what will make you happiest and don’t sweat the future (seniority, debt, stock buybacks, automation, etc... you can’t control it anyway).

That is literally the point i was making.

He does live in an AA base, just can’t hold it yet. He is on the verge of holding it though.

Great comments all. Appreciate the inputs. I’ll probably float the app again and make a decision if it triggers. We miss Colorado (despite Blue wave) and are very meh about CLT. It’s the commuting 500+ hours/month for 20 years that has me in consternation. And a slight inner turmoil lingers for pulling my UAL app two years back. Will probably split the difference and stay AA CLT for half the time and commute from Colorado for the last decade. Maybe....

AA has $4b in investments and $300m in cash.

On that $4.3b they earned $33m in interest last quarter. That is an annualized 3.0%.

So, no, they are not making "considerably more" (your words) than 5% off their "liquidity".

Saying AA has $7b in "liquidity" includes $3b credit available to them but not drawn. That is essentially a credit card with $3b cash advance on it.

Their interest payout is around $1b a year, and runs around 5.4%.

You can learn all of this by reading our quarterly and annual reports.

https://americanairlines.gcs-web.com/node/37356/html

I don’t mean that they will be making more than 5% in annual interest, I'm simply saying that >5% is a hurdle rate for any capital expenditure.

Thanks for pointing me to the 10-q, although I spent 5 years in planning at AA; revenue management and fleet planning. Treasury/Capital Planning, was not my area of expertise. Doug reiterates on every investor call that AA has a liquidity of $7B, and I took that at face value - I was wrong.

Plus Doug has stated publicly that AA will never lose money again.... so you have that going for ya, which is nice!

It’s more than the blue wave, even my liberal friends and family want to move. It’s just changing rapidly. You can have great life in CLT, and will probably hold it before you could Interview, get a CJO, get a class date, then hold DEN at UAL. I have the opposite problem of you, we thought about moving to CLT when I got hired, and moved home to Colorado instead. Now the kids are well established and we are tied in. I regret it every day.

You won’t commute from CLT for 20 years...that’s not mathematically possible, unless they close the base or shrink it rapidly. The problem is, it’s still being affected by the integration. LAA guys want it and new hires that were on the LAA side senior to you want it, and they seem to have shrunk the flying a bit. It won’t be forever though.