AA Could Crash, but is it the only one?
#11
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Joined APC: Mar 2006
Position: guppy CA
Posts: 5,153
Chapter 11 in this environment is quite likely to lead to chapter 7. A reorganization under chapter 11 is only possible if a business has a viable revenue stream. Currently that is not the case. Keep in mind when you file chapter 11 you end up on a cash basis for day to day expenses and financial control is passed to the creditors committee. Delta airlines came within 1 vote of going away when the creditors voted on Parker’s offer. The first airline to file chapter 11 will have a strong possibility of liquidation. All the major airline management teams will fight tooth and nail to avoid filing.
They make far too much money on those airline credit cards to let the golden geese die.
The big losers will be rank and file airline employees. This $hitshow's no different than previous $hitshows.
#13
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Joined APC: Dec 2007
Posts: 618
What’s the creditors options? You need cash to emerge from BK and you need revenue. Could they emerge from chapter 11, very possible. But if demand is 50% from what it was AA will be about 50% smaller. All that is contingent On the current value of parts, slots, real estate and planes. Creditors will have to decide which is the better option. I believe going into BK first over the other airlines could be advantageous because many creditors are exposed to all 3 and they may be willing to take a haircut on the first BK, but not so willing with the other airlines.
#14
Pure speculation, but everyone always says the majors can’t merge now due to competition, then why would the govt allow us to liquidate and be gone? That’s another way to eliminate competition. Not sure what form relief would come, but I think they would do something.
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#15
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Joined APC: Sep 2015
Posts: 276
Pure speculation, but everyone always says the majors can’t merge now due to competition, then why would the govt allow us to liquidate and be gone? That’s another way to eliminate competition. Not sure what form relief would come, but I think they would do something.
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#16
So with that theory, why would any Airline pay their bills ever again? After all, they will just get bailed out by the taxpayers and get to keep all their toys anyway. What happens as a private citizen when you declare bankruptcy? Do the creditors just say don’t worry about it, we got you dog? No, they start seizing assets to get (some, not all) of the money you owe. Back in the 80’s the creditors weren’t kind to Airlines like Braniff, Eastern, TWA, or Pan Am. Some of them were liquidated completely and others were required to divest gates, slots, and other assets to their competitors. I see the same thing happening again. American got their LHR slots from TWA when TWA needed to raise cash to keep the lights on. Years later, American acquired the rest. Delta got their New York and European routes from Pan Am. United got their SFO and Pacific division from Pan Am. I see history repeating itself again. The Airlines that have enough cash (Southwest) to weather the storm are going to be shopping for assets from their competitors when this crisis is over.
My point is that everyone thinks mergers are off the table due to decreased competition. A liquidation decreases competition and you lose 130,000 jobs. I’m looking for reasons that we won’t go away. When everybody says “a major will fail,” it’s widely assumed AA is the company in question.
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#17
I'm still wondering about Delta's ownership stakes in foreign airlines and where the accounting shakes out if those investments become worthless. In addition, what responsibilities might they have such as labor/pension issues that they couldn't walk away from unlike in the US?
Little info on the subject.
Little info on the subject.
#19
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Joined APC: Apr 2011
Posts: 1,533
So with that theory, why would any Airline pay their bills ever again? After all, they will just get bailed out by the taxpayers and get to keep all their toys anyway. What happens as a private citizen when you declare bankruptcy? Do the creditors just say don’t worry about it, we got you dog? No, they start seizing assets to get (some, not all) of the money you owe. Back in the 80’s the creditors weren’t kind to Airlines like Braniff, Eastern, TWA, or Pan Am. Some of them were liquidated completely and others were required to divest gates, slots, and other assets to their competitors. I see the same thing happening again. American got their LHR slots from TWA when TWA needed to raise cash to keep the lights on. Years later, American acquired the rest. Delta got their New York and European routes from Pan Am. United got their SFO and Pacific division from Pan Am. I see history repeating itself again. The Airlines that have enough cash (Southwest) to weather the storm are going to be shopping for assets from their competitors when this crisis is over.
#20
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Joined APC: Dec 2017
Position: Retired NJA & AA
Posts: 1,913
I just post articles that might be of interest to the APC members. I'm a news junkie and used to do the official news posting for a union message board way back when. If the mods want me to stop I will, I did some make some changes on how I post at their request to avoid any copyright issues. Sometimes it's hard to decide if the article should be added to an existing thread or make a new one, or even what forum to put it in. And really there are no experts around since the last time we had something of this magnitude was 1918. So it's all just opinions and guesswork. I did mess up a few days ago when I posted an article that was written by a freaking undergrad college student who was a pilot wannabe. Didn't catch that. I've been checking more carefully since then.
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