AMR may be sold off
01-28-2012, 11:52 AM
#103
SDQ Base Chief
Joined APC: Mar 2006
Position: 320 CA
Posts: 5,588
Good read regarding the recent crazy merger/buyout announcements and AMR:
Swelbar: Pondering More of American
Swelbar: Pondering More of American
Swelbar: Pondering More of American’s Bankruptcy “News” »
So much speculation around what American Airlines might be upon exit from bankruptcy; so many scenario possibilities. Some media and those with specific interests in the industry are moving pieces around the game board with talk of mergers and acquisitions. I’m willing to play, but with a caveat; no one should take all the recent posturing seriously – at least not yet. And it won’t be tomorrow, or next week, or even next month. More likely the serious gamesmanship will begin approximately 7-8 months from now as creditors evaluate and negotiate American’s proposed plan of reorganization. Right now, AMR has no choice but to approach the upcoming Section 1110, 1113, 1114 and all other discussions as if it will emerge as a stand-alone entity.
The world is much more comfortable with the bankruptcy process today than it was even a few years ago. Lessons have been learned. Hostile runs on companies in bankruptcy are probably not the answer if a potential suitor really wants to be successful in being a part of the ultimate entity that emerges – unless there is no other option as creditors get close to signing off on some other plan of reorganization. American will tell stakeholders what IT thinks needs to be done to put the company on a viable path.
American’s $4 Billion In Cash – It Is Not Quite What It Seems
I just have to get one thing off of my chest: $4 billion in cash on November 29, 2011 was about to become something much less. It is one of the reasons why American filed for bankruptcy protection before it was too late. Can we stop talking about a cash-rich filing?
Reactions ranging from dumbstruck employees to PBGC Director Josh Gotbaum’s comments regarding AMR’s bankruptcy filing with over $4 billion in cash leave me smiling. The fact is AMR’s $4 billion cash reserve would have depleted quickly had the company continued without bankruptcy – possibly to the point of corporate oblivion. AMR’s Board of Directors had no choice but to file as the company likely had very little access to affordable credit markets since few of the company’s assets were unencumbered.
Since September 2001, airline companies have significantly increased their liquidity (unrestricted cash plus available credit) as a percent of trailing twelve month revenues from roughly 10 percent to 20+ percent. In 2011, only American and US Airways held liquidity balances of less than 20 percent. While American’s cash erosion will be mitigated in bankruptcy, it resembles only adequate operating liquidity not a pool from which to pay large fixed obligations.
With that $4 billion in cash, American faced a pension contribution of $100 million during the fourth quarter of 2011; and $560 million in 2012; maturities of long-term debt including sinking fund requirements were $1.1 billion during the fourth quarter of 2011; and $1.8 billion during 2012. These obligations should be considered against the backdrop of an airline entity that was burning cash at the operating level and the fact nearly all of its assets were pledged as collateral. While it is true that some $800 million in assets would have become unencumbered during 2012, the amount is certainly less than necessary to maintain sufficient liquidity and meet fixed obligations assuming American would need to collateralize any credit it would seek.
In fact, if AMR were to pay its obligations with its existing cash balance, it is highly likely that the company would have faced a liquidity squeeze at some point during 2012. And that’s assuming no fuel spikes or world events that might impact airline operations. I think it can safely be deduced the company did what was prudent to preserve the enterprise. Moreover, employees in denial and a PBGC with its own vested interests should step back and reexamine whether the $4 billion is really $4 billion.
I don’t think so. The case is clear that a $4 billion liquidity balance is on the low end of optimum for a $22 billion dollar revenue generating airline company whether in bankruptcy or not.
Last Friday’s Bloomberg “News” – A Combined US Airways and American
The cynic in me just loves to read airline news published late in the day on a Friday afternoon. But that is precisely what we got from Bloomberg last week titled: US Airways Said To Consider American Airlines Merger To Fill Revenue Gap. There were no sources to the story, only the classic reference to “people familiar” with the Tempe-based airline’s current activity. Neither US Airways nor American Airlines would comment. You know how it goes. [On the US Airways 4th quarter earnings call Wednesday the company did confirm the hiring of the advisers to study the matter mentioned in the story]
It has been suggested by some that American needs to pare capacity along the lines of other U.S. airlines in the domestic arena because it hasn’t done enough to date. US Airways is often used as the example of a company that has demonstrated stringent capacity discipline and now has significantly improved margin results. Yet the article says American Airlines might have pared too much capacity – to the point where the Fort Worth carrier is no longer attractive to significant portions of the revenue rich corporate travel sector. Someone is right - I guess?
In some circles, both American and US Airways’ networks are referenced as sub-optimal. My question then: does sub-optimal plus sub-optimal equal optimal (at least when compared to United/Continental and Northwest/Delta)? Probably not, but there is the possibility the whole could/would equal more than the sum of the parts and thus generate more revenue. That doesn’t necessarily mean it’s the best-case scenario because there are plenty of questions when considering an American - US Airways combination -- but one can consider such a combination.
A merged American and US Airways would be the second-largest U.S. airline on paper, but US Airways got out of the mid-continent hub business when it left Pittsburgh. So, how would the Chicago hub fit in? Philadelphia might be the poor man’s JFK (absent sufficient slots at the New York airport), but could Philadelphia prove to be an acceptable surrogate Northeast U.S. gateway to oneworld as it battles STAR and SkyTeam for high yielding east coast traffic? What happens to the jetBlue relationship forged by American that could certainly be expanded when expected scope relaxations are achieved? If the carriers combined, is there really a need for both a Phoenix and a Dallas/Fort Worth hub? I don’t think so. If not, where would the headquarters be?
If American’s exit were to include US Airways, would oneworld make US Airways a full partner in each the transatlantic and transpacific joint ventures? I would think so because, if US Airways’ domestic system is so fertile as to fill a hole in American’s U.S. network as the media stories claim, then it must be every bit as powerful in filling oneworld’s intercontinental revenue deficiencies. Assuming that, nearly overnight, oneworld would become a more vigorous competitor with SkyTeam and STAR for traffic flows that neither carrier could capture on their own. There would be a shift of revenue share from STAR to oneworld in addition to new competition. How might STAR react if there were an overnight shift of 15 points of revenue share to oneworld? Might STAR – or United - move quickly to make US Airways a full joint venture partner?
For airline nerds like me, thinking about mergers/acquisitions by only looking at a map is fun. As games are supposed to be. But reality means there is much more to consider.
Like any other potential bidder, if US Airways were to emerge as a party to American’s exit, the Tempe-based carrier will have to win the hearts and minds of the employees, the PBGC, the rejected Section 1110 lien holders and the unsecured debt holders to name a few along with Boeing and Airbus. The onus would be on US Airways to demonstrate its plan will ensure higher returns than a stand-alone plan by American or a plan submitted by other interested parties.
Labor will be a key target. US Airways, or anyone else, will tell labor a combination can offer an option to the cuts AMR is all but certain to require. While that sounds great, labor will have to weigh any alleged benefits against a certainty it will be forced into a seniority integration process. And we all know how emotional seniority integration proceedings can be in the airline industry.
US Airways and its pilots have not negotiated a new collective bargaining agreement because of a failed seniority integration process that started in 2005 and today flounders in litigation – an internal union issue and not the company’s. Nonetheless, would that mean American Airlines’ pilots could not achieve raises/improvements from the company because the integration of US Airways and America West pilots is not complete? What about the flight attendants?
The Section 1113 and 1114 process at American all but ensures those employees will take significant cuts in work rules and benefits as those are the areas where AA has the largest competitive exposure. Even after those cuts, though, some AA employees (like pilots) will still likely make more than many peers at the current US Airways. So, would the theoretical combined carrier ask AA employees to take less so US Airways employees can get more than they might? How does that apply to work rules, benefits? There are those who would (and, in fact, are) dismiss these issues saying they can be dealt with later, but that’s short-sighted.
A Combined Delta Air Lines and American
I still cannot get beyond the regulatory hurdles this combination would face, let alone the fact that all of the issues discussed above would also apply. But here are four things that immediately concern me:
1.There are significant overlapping routes that would need to be addressed by the U.S. regulatory agencies to the point the carve-outs necessary might look and feel like a breakup of American, similar to Delta’s past devouring of parts of Pan Am.
2.Given the current strains between the U.S. and the European Union, combined with the latter’s consternation over the existing alliance construct, I cannot imagine the EU having an appetite for seeing three global alliances reduced to two.
3.The concentration at New York JFK specifically and New York generally.
4.Given the Obama Administration’s expressions of regulatory angst and outright displeasure when #2 AT&T proposed combining with #3 T-Mobile, I find it unlikely that any of the respective agencies would embrace a similar proposition in the airline industry.
As they say in the South, “this dog don’t hunt”. But let it be clear I respect Anderson, Hirst and the Delta team as they did push a merger with Northwest and the slot swap with US Airways through the regulatory process. And that is no small feat.
Concluding Thoughts
At this point, three/four names are circulating as having an interest in a restructured American Airlines: US Airways, Delta Air Lines, TPG Capital and, possibly, IAG. Whether American emerges from bankruptcy alone or with a partner(s), the case is going to take many twists and turns – some daily.
In pure laboratory conditions where American could restructure without any outside influences, AA would emerge as a much lower cost entity and, therefore, pose competitive threats to other U.S. airlines.
To mitigate American’s potential cost advantage, other airlines will be sure to muck up the process to ensure that American is not fully successful in achieving its stated result. Delta is not necessarily just gaming US Airways to cough up more in a bid or vice versa, but as I’m fond of saying, it is the law of unintended – or in this case intended - consequences. Both are trying to ensure American has to pay more. The conditions for American will prove anything but pure.
Of course, the game changes if United moves to buy US Airways in order to prevent losing the 15 points of transatlantic revenue share it delivers to the STAR alliance. I do not believe Delta has a chance unless the Unsecured Creditor Committee (UCC) recommends, and the bankruptcy court agrees, that the parts of American are worth more than the carrier as an ongoing enterprise. In that scenario, Delta will try to secure as many of American’s assets as it can conceivably digest and still get regulatory approval.
But there we go again, speculating. In order of least employee/corporate disruption I rank today’s possibilities as follows:
1.American as a stand-alone
2.American and IAG/oneworld
3.American and TPG Capital
4.American and IAG/oneworld, TPG Capital
5.American and IAG/oneworld, TPG Capital and US Airways
6.American and US Airways
7.American and most anything Delta
8.Liquidation of Assets
The one thing I can positively guarantee, though, is there will be employee/corporate disruption and plenty more speculation to come. Let the games begin.
So much speculation around what American Airlines might be upon exit from bankruptcy; so many scenario possibilities. Some media and those with specific interests in the industry are moving pieces around the game board with talk of mergers and acquisitions. I’m willing to play, but with a caveat; no one should take all the recent posturing seriously – at least not yet. And it won’t be tomorrow, or next week, or even next month. More likely the serious gamesmanship will begin approximately 7-8 months from now as creditors evaluate and negotiate American’s proposed plan of reorganization. Right now, AMR has no choice but to approach the upcoming Section 1110, 1113, 1114 and all other discussions as if it will emerge as a stand-alone entity.
The world is much more comfortable with the bankruptcy process today than it was even a few years ago. Lessons have been learned. Hostile runs on companies in bankruptcy are probably not the answer if a potential suitor really wants to be successful in being a part of the ultimate entity that emerges – unless there is no other option as creditors get close to signing off on some other plan of reorganization. American will tell stakeholders what IT thinks needs to be done to put the company on a viable path.
American’s $4 Billion In Cash – It Is Not Quite What It Seems
I just have to get one thing off of my chest: $4 billion in cash on November 29, 2011 was about to become something much less. It is one of the reasons why American filed for bankruptcy protection before it was too late. Can we stop talking about a cash-rich filing?
Reactions ranging from dumbstruck employees to PBGC Director Josh Gotbaum’s comments regarding AMR’s bankruptcy filing with over $4 billion in cash leave me smiling. The fact is AMR’s $4 billion cash reserve would have depleted quickly had the company continued without bankruptcy – possibly to the point of corporate oblivion. AMR’s Board of Directors had no choice but to file as the company likely had very little access to affordable credit markets since few of the company’s assets were unencumbered.
Since September 2001, airline companies have significantly increased their liquidity (unrestricted cash plus available credit) as a percent of trailing twelve month revenues from roughly 10 percent to 20+ percent. In 2011, only American and US Airways held liquidity balances of less than 20 percent. While American’s cash erosion will be mitigated in bankruptcy, it resembles only adequate operating liquidity not a pool from which to pay large fixed obligations.
With that $4 billion in cash, American faced a pension contribution of $100 million during the fourth quarter of 2011; and $560 million in 2012; maturities of long-term debt including sinking fund requirements were $1.1 billion during the fourth quarter of 2011; and $1.8 billion during 2012. These obligations should be considered against the backdrop of an airline entity that was burning cash at the operating level and the fact nearly all of its assets were pledged as collateral. While it is true that some $800 million in assets would have become unencumbered during 2012, the amount is certainly less than necessary to maintain sufficient liquidity and meet fixed obligations assuming American would need to collateralize any credit it would seek.
In fact, if AMR were to pay its obligations with its existing cash balance, it is highly likely that the company would have faced a liquidity squeeze at some point during 2012. And that’s assuming no fuel spikes or world events that might impact airline operations. I think it can safely be deduced the company did what was prudent to preserve the enterprise. Moreover, employees in denial and a PBGC with its own vested interests should step back and reexamine whether the $4 billion is really $4 billion.
I don’t think so. The case is clear that a $4 billion liquidity balance is on the low end of optimum for a $22 billion dollar revenue generating airline company whether in bankruptcy or not.
Last Friday’s Bloomberg “News” – A Combined US Airways and American
The cynic in me just loves to read airline news published late in the day on a Friday afternoon. But that is precisely what we got from Bloomberg last week titled: US Airways Said To Consider American Airlines Merger To Fill Revenue Gap. There were no sources to the story, only the classic reference to “people familiar” with the Tempe-based airline’s current activity. Neither US Airways nor American Airlines would comment. You know how it goes. [On the US Airways 4th quarter earnings call Wednesday the company did confirm the hiring of the advisers to study the matter mentioned in the story]
It has been suggested by some that American needs to pare capacity along the lines of other U.S. airlines in the domestic arena because it hasn’t done enough to date. US Airways is often used as the example of a company that has demonstrated stringent capacity discipline and now has significantly improved margin results. Yet the article says American Airlines might have pared too much capacity – to the point where the Fort Worth carrier is no longer attractive to significant portions of the revenue rich corporate travel sector. Someone is right - I guess?
In some circles, both American and US Airways’ networks are referenced as sub-optimal. My question then: does sub-optimal plus sub-optimal equal optimal (at least when compared to United/Continental and Northwest/Delta)? Probably not, but there is the possibility the whole could/would equal more than the sum of the parts and thus generate more revenue. That doesn’t necessarily mean it’s the best-case scenario because there are plenty of questions when considering an American - US Airways combination -- but one can consider such a combination.
A merged American and US Airways would be the second-largest U.S. airline on paper, but US Airways got out of the mid-continent hub business when it left Pittsburgh. So, how would the Chicago hub fit in? Philadelphia might be the poor man’s JFK (absent sufficient slots at the New York airport), but could Philadelphia prove to be an acceptable surrogate Northeast U.S. gateway to oneworld as it battles STAR and SkyTeam for high yielding east coast traffic? What happens to the jetBlue relationship forged by American that could certainly be expanded when expected scope relaxations are achieved? If the carriers combined, is there really a need for both a Phoenix and a Dallas/Fort Worth hub? I don’t think so. If not, where would the headquarters be?
If American’s exit were to include US Airways, would oneworld make US Airways a full partner in each the transatlantic and transpacific joint ventures? I would think so because, if US Airways’ domestic system is so fertile as to fill a hole in American’s U.S. network as the media stories claim, then it must be every bit as powerful in filling oneworld’s intercontinental revenue deficiencies. Assuming that, nearly overnight, oneworld would become a more vigorous competitor with SkyTeam and STAR for traffic flows that neither carrier could capture on their own. There would be a shift of revenue share from STAR to oneworld in addition to new competition. How might STAR react if there were an overnight shift of 15 points of revenue share to oneworld? Might STAR – or United - move quickly to make US Airways a full joint venture partner?
For airline nerds like me, thinking about mergers/acquisitions by only looking at a map is fun. As games are supposed to be. But reality means there is much more to consider.
Like any other potential bidder, if US Airways were to emerge as a party to American’s exit, the Tempe-based carrier will have to win the hearts and minds of the employees, the PBGC, the rejected Section 1110 lien holders and the unsecured debt holders to name a few along with Boeing and Airbus. The onus would be on US Airways to demonstrate its plan will ensure higher returns than a stand-alone plan by American or a plan submitted by other interested parties.
Labor will be a key target. US Airways, or anyone else, will tell labor a combination can offer an option to the cuts AMR is all but certain to require. While that sounds great, labor will have to weigh any alleged benefits against a certainty it will be forced into a seniority integration process. And we all know how emotional seniority integration proceedings can be in the airline industry.
US Airways and its pilots have not negotiated a new collective bargaining agreement because of a failed seniority integration process that started in 2005 and today flounders in litigation – an internal union issue and not the company’s. Nonetheless, would that mean American Airlines’ pilots could not achieve raises/improvements from the company because the integration of US Airways and America West pilots is not complete? What about the flight attendants?
The Section 1113 and 1114 process at American all but ensures those employees will take significant cuts in work rules and benefits as those are the areas where AA has the largest competitive exposure. Even after those cuts, though, some AA employees (like pilots) will still likely make more than many peers at the current US Airways. So, would the theoretical combined carrier ask AA employees to take less so US Airways employees can get more than they might? How does that apply to work rules, benefits? There are those who would (and, in fact, are) dismiss these issues saying they can be dealt with later, but that’s short-sighted.
A Combined Delta Air Lines and American
I still cannot get beyond the regulatory hurdles this combination would face, let alone the fact that all of the issues discussed above would also apply. But here are four things that immediately concern me:
1.There are significant overlapping routes that would need to be addressed by the U.S. regulatory agencies to the point the carve-outs necessary might look and feel like a breakup of American, similar to Delta’s past devouring of parts of Pan Am.
2.Given the current strains between the U.S. and the European Union, combined with the latter’s consternation over the existing alliance construct, I cannot imagine the EU having an appetite for seeing three global alliances reduced to two.
3.The concentration at New York JFK specifically and New York generally.
4.Given the Obama Administration’s expressions of regulatory angst and outright displeasure when #2 AT&T proposed combining with #3 T-Mobile, I find it unlikely that any of the respective agencies would embrace a similar proposition in the airline industry.
As they say in the South, “this dog don’t hunt”. But let it be clear I respect Anderson, Hirst and the Delta team as they did push a merger with Northwest and the slot swap with US Airways through the regulatory process. And that is no small feat.
Concluding Thoughts
At this point, three/four names are circulating as having an interest in a restructured American Airlines: US Airways, Delta Air Lines, TPG Capital and, possibly, IAG. Whether American emerges from bankruptcy alone or with a partner(s), the case is going to take many twists and turns – some daily.
In pure laboratory conditions where American could restructure without any outside influences, AA would emerge as a much lower cost entity and, therefore, pose competitive threats to other U.S. airlines.
To mitigate American’s potential cost advantage, other airlines will be sure to muck up the process to ensure that American is not fully successful in achieving its stated result. Delta is not necessarily just gaming US Airways to cough up more in a bid or vice versa, but as I’m fond of saying, it is the law of unintended – or in this case intended - consequences. Both are trying to ensure American has to pay more. The conditions for American will prove anything but pure.
Of course, the game changes if United moves to buy US Airways in order to prevent losing the 15 points of transatlantic revenue share it delivers to the STAR alliance. I do not believe Delta has a chance unless the Unsecured Creditor Committee (UCC) recommends, and the bankruptcy court agrees, that the parts of American are worth more than the carrier as an ongoing enterprise. In that scenario, Delta will try to secure as many of American’s assets as it can conceivably digest and still get regulatory approval.
But there we go again, speculating. In order of least employee/corporate disruption I rank today’s possibilities as follows:
1.American as a stand-alone
2.American and IAG/oneworld
3.American and TPG Capital
4.American and IAG/oneworld, TPG Capital
5.American and IAG/oneworld, TPG Capital and US Airways
6.American and US Airways
7.American and most anything Delta
8.Liquidation of Assets
The one thing I can positively guarantee, though, is there will be employee/corporate disruption and plenty more speculation to come. Let the games begin.
01-28-2012, 01:21 PM
#105
Banned
Joined APC: Jun 2008
Posts: 8,350
Originally Posted by Sink r8
Not always a fan of Swelbar, but I think the above distills the discussion down to the essentials pretty well.
It is this last point that I consider AMR management to walk the finest line and would be the "hole in the line" for competitor infiltration. The problem is, it appears AMR management might be about to adopt a strategy of shielding their fleet retention plan and possibly even their business plan from others (and perhaps labor) until AFTER they get labor cuts. If they do that with labor and empoyees succomb to draconian cuts based on "mystery threats" and then it turns out management has once again slipped them a rusty musket, this time by misrepresenting their true plans for scheming leverage, labor is more likely to then actively seek (and possibly assist) outside competitors so they could then stick it back to AMR before the time clock runs out. AA labor having meetings with DAL or U or a combination of competitors to get ANY deal that preserves the most jobs, gives them a better deal compensation wise, while (right or wrong) finally getting long awaited revenge for decades of maltreatment would be the ultimate irony if AMR uses this BK process to once again "conquer" their employees.
A very dicey game for AMR and one wrong step and the thickening circle of buzzards might just get their opening. Again, I consider AMR to have a "trojan horse" scenario with their employee groups right now, especially their pilots. Even if AMR plays their 1113's pretty much down the middle, if something changes, many of the pilots could vacate quite quickly. This could occur evenly accross all fleets and the training process could easily never catch up. Parking S80's is one thing, but exiting BK and then having to park a lot of new 737's or 777's suddenly puts AMR in a very bad position or likewise, but in opposition, if a hostile assault unwanted by the employees occurs by one or more competitors. It takes 2 months to train 1 pilot (another month or two for the interview process and all the PRIA stuff, etc.). Whomever inherits AA, be it AMR or other(s) could find themselves with a lot of parked aircraft in short order and no one to fly them in time to prevent the mass exodus of revenue to other more stable frequent flyer palns and networks.
It could turn out to be the biggest game of russian roulette the airline industry has ever seen, if not played perfectly with exact timing. If done wrong by an outside competitor, they could easily lose more $$ in lost revenue and expenses, then it cost to aquire it in the first place. This has already been demonstrated by.......*drum roll, please*.......AMR themselves, in the TWA acquisition whereby they jumped the gun (or were suckered) into bying TWA to counter the UAL/U proposed merger that failed. I believe AMR paid $800 million for TWA assets, then spent another $800 million parking most of the planes, dumping most of the equipment and furloughing most of the employees. A colassal blunder, no doubt.
You know what scares me ?
It's essentially still the same management. God, I hope they don't make the same mistake twice.
Late next week when (hopefully) details start emerging on what the future corporate culture of AA management will be towards their employees as demonstrated by their 1113's (and possibly their business plan), it will tell more about AA's future then dollars and cents. If it is a complete gutting and a repeat of business as usual, THEN I'll change my tune and say I don't think AMR management will survive the process in control, because they will have lost the most important ally they'll ever have in regard to defending AA from outside competitve forces. It's an ally that can scatter quickly and willingly to more desirable areas leaving a cold chill blowing through the halls of Centreport.
01-28-2012, 01:51 PM
#106
Gets Weekends Off
Joined APC: Apr 2009
Posts: 1,568
I read a while back where Horton has already started cleaning house in mgmt. I think you are in for the same old mgmt, if not worse. Hell, they have kept that douchbag brundage (did not capitalize his name on purpose, not deserving) around. If they were serious about not ****ing off labor(especially pilots) that cocksucker should have been the first to go.
Originally Posted by eaglefly
Neither am I a fan, but in this instance his conclusions parallel mine quite closely, that being the most likely result of AA remaining stand alone (or at least tethered to One World/IAG) and that if any other competitors want to pick apart the parts and decimate the whole, it would have to be palatable to the AA employees to prevent their resistance. Again, the employees don't control, but do have influence, especially if it involves break-up.
It is this last point that I consider AMR management to walk the finest line and would be the "hole in the line" for competitor infiltration. The problem is, it appears AMR management might be about to adopt a strategy of shielding their fleet retention plan and possibly even their business plan from others (and perhaps labor) until AFTER they get labor cuts. If they do that with labor and empoyees succomb to draconian cuts based on "mystery threats" and then it turns out management has once again slipped them a rusty musket, this time by misrepresenting their true plans for scheming leverage, labor is more likely to then actively seek (and possibly assist) outside competitors so they could then stick it back to AMR before the time clock runs out. AA labor having meetings with DAL or U or a combination of competitors to get ANY deal that preserves the most jobs, gives them a better deal compensation wise, while (right or wrong) finally getting long awaited revenge for decades of maltreatment would be the ultimate irony if AMR uses this BK process to once again "conquer" their employees.
A very dicey game for AMR and one wrong step and the thickening circle of buzzards might just get their opening. Again, I consider AMR to have a "trojan horse" scenario with their employee groups right now, especially their pilots. Even if AMR plays their 1113's pretty much down the middle, if something changes, many of the pilots could vacate quite quickly. This could occur evenly accross all fleets and the training process could easily never catch up. Parking S80's is one thing, but exiting BK and then having to park a lot of new 737's or 777's suddenly puts AMR in a very bad position or likewise, but in opposition, if a hostile assault unwanted by the employees occurs by one or more competitors. It takes 2 months to train 1 pilot (another month or two for the interview process and all the PRIA stuff, etc.). Whomever inherits AA, be it AMR or other(s) could find themselves with a lot of parked aircraft in short order and no one to fly them in time to prevent the mass exodus of revenue to other more stable frequent flyer palns and networks.
It could turn out to be the biggest game of russian roulette the airline industry has ever seen, if not played perfectly with exact timing. If done wrong by an outside competitor, they could easily lose more $$ in lost revenue and expenses, then it cost to aquire it in the first place. This has already been demonstrated by.......*drum roll, please*.......AMR themselves, in the TWA acquisition whereby they jumped the gun (or were suckered) into bying TWA to counter the UAL/U proposed merger that failed. I believe AMR paid $800 million for TWA assets, then spent another $800 million parking most of the planes, dumping most of the equipment and furloughing most of the employees. A colassal blunder, no doubt.
You know what scares me ?
It's essentially still the same management. God, I hope they don't make the same mistake twice.
Late next week when (hopefully) details start emerging on what the future corporate culture of AA management will be towards their employees as demonstrated by their 1113's (and possibly their business plan), it will tell more about AA's future then dollars and cents. If it is a complete gutting and a repeat of business as usual, THEN I'll change my tune and say I don't think AMR management will survive the process in control, because they will have lost the most important ally they'll ever have in regard to defending AA from outside competitve forces. It's an ally that can scatter quickly and willingly to more desirable areas leaving a cold chill blowing through the halls of Centreport.
It is this last point that I consider AMR management to walk the finest line and would be the "hole in the line" for competitor infiltration. The problem is, it appears AMR management might be about to adopt a strategy of shielding their fleet retention plan and possibly even their business plan from others (and perhaps labor) until AFTER they get labor cuts. If they do that with labor and empoyees succomb to draconian cuts based on "mystery threats" and then it turns out management has once again slipped them a rusty musket, this time by misrepresenting their true plans for scheming leverage, labor is more likely to then actively seek (and possibly assist) outside competitors so they could then stick it back to AMR before the time clock runs out. AA labor having meetings with DAL or U or a combination of competitors to get ANY deal that preserves the most jobs, gives them a better deal compensation wise, while (right or wrong) finally getting long awaited revenge for decades of maltreatment would be the ultimate irony if AMR uses this BK process to once again "conquer" their employees.
A very dicey game for AMR and one wrong step and the thickening circle of buzzards might just get their opening. Again, I consider AMR to have a "trojan horse" scenario with their employee groups right now, especially their pilots. Even if AMR plays their 1113's pretty much down the middle, if something changes, many of the pilots could vacate quite quickly. This could occur evenly accross all fleets and the training process could easily never catch up. Parking S80's is one thing, but exiting BK and then having to park a lot of new 737's or 777's suddenly puts AMR in a very bad position or likewise, but in opposition, if a hostile assault unwanted by the employees occurs by one or more competitors. It takes 2 months to train 1 pilot (another month or two for the interview process and all the PRIA stuff, etc.). Whomever inherits AA, be it AMR or other(s) could find themselves with a lot of parked aircraft in short order and no one to fly them in time to prevent the mass exodus of revenue to other more stable frequent flyer palns and networks.
It could turn out to be the biggest game of russian roulette the airline industry has ever seen, if not played perfectly with exact timing. If done wrong by an outside competitor, they could easily lose more $$ in lost revenue and expenses, then it cost to aquire it in the first place. This has already been demonstrated by.......*drum roll, please*.......AMR themselves, in the TWA acquisition whereby they jumped the gun (or were suckered) into bying TWA to counter the UAL/U proposed merger that failed. I believe AMR paid $800 million for TWA assets, then spent another $800 million parking most of the planes, dumping most of the equipment and furloughing most of the employees. A colassal blunder, no doubt.
You know what scares me ?
It's essentially still the same management. God, I hope they don't make the same mistake twice.
Late next week when (hopefully) details start emerging on what the future corporate culture of AA management will be towards their employees as demonstrated by their 1113's (and possibly their business plan), it will tell more about AA's future then dollars and cents. If it is a complete gutting and a repeat of business as usual, THEN I'll change my tune and say I don't think AMR management will survive the process in control, because they will have lost the most important ally they'll ever have in regard to defending AA from outside competitve forces. It's an ally that can scatter quickly and willingly to more desirable areas leaving a cold chill blowing through the halls of Centreport.
01-28-2012, 02:03 PM
#107
Banned
Joined APC: Jun 2008
Posts: 8,350
Originally Posted by NERD
I read a while back where Horton has already started cleaning house in mgmt. I think you are in for the same old mgmt, if not worse. Hell, they have kept that douchbag brundage (did not capitalize his name on purpose, not deserving) around. If they were serious about not ****ing off labor(especially pilots) that cocksucker should have been the first to go.
In that case, then yes, I think AA is then on numbered days. There won't be any second chances there, as there's simply been too much psychological damage for too long. AA would have to rebuild its house with a completely new group of employees and those remaining would simply poison the well until they were virtually all gone.
You can't make a silk purse out of a sow's a**hole.
01-30-2012, 09:03 AM
#108
New Hire
Joined APC: Apr 2010
Posts: 4
Originally Posted by newKnow
When's the last time a pilot correctly predicted anything dealing with what was going to happen with the airline industry?
01-30-2012, 09:21 AM
#109
Banned
Joined APC: Jun 2008
Posts: 8,350
Originally Posted by crj4life
01-14-2011 14:35 pst I believe. Don't read forums if you don't want to hear what people think. Tool...
Of course, their favorite pastime isn't venomously attacking each other and clutching to the unbridled desire of parasitic cannibalism either. It's also why they are so easily defeated. Management doesn't have to do anything but step aside and lets the rats destroy each other. In fact, poor pilots actually RUN into the arms of those that screw them over the worst.......the people they PAY to look out for them, like their unions.
Siwwy piwats...........de'll never learn.
01-31-2012, 04:37 PM
#110
Gets Weekends Off
Joined APC: Jun 2009
Posts: 5,113
Eaglefly,
You seem to have good analytical skills. Don't forget that we tend to see what we want to see. I don't really know why you continuously conclude that this merger will ride on labor, and at the same time, you correctly identify our own tendencies to be our own worst enemies.
There is no real evidence to date that management groups that fail to account for employee sentiment are punished. If it were so, Smizek and Parker would be unemployed. This is because employee, in our non-portable seniority system are in effect married to the airline. And so, by the time morale finally turns into chronic and broad-based failures, the original generation of executive is long gone. And there is a chance acceptance and apathy win out over anger anyway, and so the sick airline actually defies all expectations, and fails to die. How else can you explain LCC still flying today?
Being married when you can't really afford a divorce is a poor position from which to negotiate. You haven't done it yet, but it's quite possible you're going to find yourself compromising your dignity big time, for example taking voluntary back-to-back paycuts of 34%, and 18%.
With all that said, there will be a lot of money riding on AMR, a short exclusivity period that may level the playing field a little more, AND you guys aren't all held hostage to an A-fund. So maybe you have a shot at doing better than the others?
So I wish you luck, and I hope AMR proves me wrong (only gives me more leverage), but don't forget you're probably still somewhere between anger and denial. You don't have to let it show in your demeanor or your posts, but you shouldn't faill to factor it in your own thinking.
You seem to have good analytical skills. Don't forget that we tend to see what we want to see. I don't really know why you continuously conclude that this merger will ride on labor, and at the same time, you correctly identify our own tendencies to be our own worst enemies.
There is no real evidence to date that management groups that fail to account for employee sentiment are punished. If it were so, Smizek and Parker would be unemployed. This is because employee, in our non-portable seniority system are in effect married to the airline. And so, by the time morale finally turns into chronic and broad-based failures, the original generation of executive is long gone. And there is a chance acceptance and apathy win out over anger anyway, and so the sick airline actually defies all expectations, and fails to die. How else can you explain LCC still flying today?
Being married when you can't really afford a divorce is a poor position from which to negotiate. You haven't done it yet, but it's quite possible you're going to find yourself compromising your dignity big time, for example taking voluntary back-to-back paycuts of 34%, and 18%.
With all that said, there will be a lot of money riding on AMR, a short exclusivity period that may level the playing field a little more, AND you guys aren't all held hostage to an A-fund. So maybe you have a shot at doing better than the others?
So I wish you luck, and I hope AMR proves me wrong (only gives me more leverage), but don't forget you're probably still somewhere between anger and denial. You don't have to let it show in your demeanor or your posts, but you shouldn't faill to factor it in your own thinking.
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