Halon1211

I decided to post this here instead of under the Spirit Airlines section in hopes there are some old time pilots lurking about that can educate some younger pilots about what happens to Braniff and Eastern airlines.

There are many Spirit pilots who are in disbelief that Spirit Airlines could just be completely liquidated. I have even heard of people saying that’s never happened in history and yet we have two examples of two really big airlines that it happened to.


not saying it’s for sure going to happen, but I think at this point, it’s a very big possibility, and I’m talking to a of guys that are just whistling past the grave

https://en.m.wikipedia.org/wiki/Bran...tional_Airways

https://en.m.wikipedia.org/wiki/Eastern_Air_Lines

nene

IF Spirit ends up in BK court (big IF, I have no idea if they will or will not), mgmt largely loses control of the result as the creditors get to decide via committee if selling off the parts is more profitable than allowing the entity to reorganize and reemerge as a standalone entity. The creditors could decide to sell in whole to another entity or that selling off the parts yields the most cash.

In this environment, with many airlines making profits and looking for more assets, it would be dangerous for Spirit to ender BK with the expectation of remaining intact. Mgmt would have to convince the creditors that they have a plan to make more $$$$ than is being offered for the gates, unbroken planes, future orders, etc.

When the legacies went BK back in the 2000's largely to shed pensions and reset labor contracts, all of the airlines were hurting, so there was very little market for each others assets, but even then you had ambitious mgmts trying to purchase others by financing thier own assets.

Spirit supposedly already has good terms on aircraft purchases, going rate on labor, and uses cheap subcontractors when possible. In what way could they force creditors to reorganize their debt that they are going to suddenly make many more profits? If they go after labor in this market, theyll bleed employees, if they try and short AC financers, they'll rehome airplanes.

Personally, I hope they pull through, as it's never good for the industry when one competitor is desperate, they traditionally.dump yields and make it hard for everyone to make a profit.

WhyIFly

I was looking at routes that are served both by the ULCC's and Legacy carriers on the same days at approximately the same time. I looked at Orlando and FLL, as well as a few other cities. What got me thinking about this was a conversation in a bar with a Frontier pilot that said that he commutes to work on Frontier metal, even though it is less convienent, because there are always seats open on the Frontier flight and he always gets a seat in the back, whereas the AA and DAL flights which are more convienent are always full and he often has to ride the jumpseat.

What is funny is that in most cases, the Legacy carriers were charging $300-$325 on average more than what the ULCC's were charging, and the Legacy airlines are showing over a 95% load factor on those flights. Customers don't want the bargain basement airline anymore. The history of meltdowns is a major problem, as well as the lack of ability to get the passengers home after a meltdown.

There was an article recently about a family that had a flight divert, and then cancel on Allegiant. If took the family 3 days to get home because of a combination of oversold flights and limited service between the 2 Allegiant cities. It just isn't worth saving a couple hundred bucks to risk things like this happening. Meanwhile, DAL had an article a couple weeks ago about their "rescue" flights out of MCO after TSA wait times had delayed passengers and hundreds were stuck at the airport. DAL sent a 330 to get them and fly them to a hub. AA also recently sent extra 777s to Cancun from CLT and MIA to pull out travelers that were stuck due to issues. AA also flew 787s to CLT during the snow storms in PHL/JFK to get the passengers home from Europe instead of leaving them stranded in Europe. Low cost carriers are not known to do these things.

At the end of the day, there is no way right now that the ULCC's can make money at the rate of the Legacy airlines. The Legacy continue to grow, and the ULCC business model does not fit with what the current demand from the market dictitates. The big banks, Wall Street, and the creditors know this.

VacancyBid

That's the real risk. Not that spirit is an unsustainable business but that its assets are worth elsewhere. Or even one critical group of assets - for instance the airplanes ... or even say 40% of the airplanes.

rickair7777

I'm not that old but long story short...


Both airlines suffered from de-regulation industry shakeups, some management errors, and in both cases labor issues were the straw that put into liquidation. The pilots weren't the entire labor problem, but a big part of it.

Today, it's no longer the wild, wild west with random cats, dogs, and astronauts swapping airlines like baseball cards. Regulators put a damper on such transactions.

NK is not too big to fail, but it may be big enough that .gov would try to facilitate some kind of bail out if needed. Depends on who's in office I guess.

Pilots might wind up in the very unenviable position of being asked for concessions to save their seniority, during one of the most epic period of pilot compensation gains in history. They can ask, that's not to say the concessions will matter either way, or save then company. But they will ask, unless possibly they're afraid that reducing compensation will aggravate recruiting and attrition to the point that it's not worth the savings. That seems actually likely at a SWAG.

BobSacamano

except that forced concessions at NK could well coincide with a larger turning of the tide. Cargo isn’t hiring. DAL is slowing hiring. WN has apparently stopped for the time being, as has F9.

Of course this makes sense because of the crazy wage gains in the last year. From fat to starving overnight is the industry’s M.O.

fcoolaiddrinker

Is there a mechanism to force concessions outside bankruptcy? I know management can get a judge to impose them in bankruptcy.

JamesBond

Are they alpa?

rickair7777

No. They can ask, generally in the context of "help us avoid a dangerous bankruptcy".

Such concessions haven't typically worked out well for pilots in the past.

But it's worth noting that the bankruptcy laws are *significantly* different today than during the last big round of chapter 11 filings. The resuls of Ch.11 are less predictable now and the DIP can easily be overruled by creditors to force liquidation. Much as a I hate to say it, concessions might actually make more sense in this environment, from a pure preservation of employment and seniority perspective.

Name User

At AA, our VP of route network planning gave a nice presentation pre-covid on this.

While it's true Spirit/Frontier can fly direct between two low-margin high volume city pairs all day for a lower CASM-ex, when they do point to point flying they just add one destination.

An AA hub like DFW/CLT with 700-900 flights a day, you add one additional outstation, and you not only add [outstation - DFW] you add [outstation - all DFW connections]. In other words while there may only be 30 people going between [outstation] and [DFW] per day, if you give them access to all the connections in DFW, you can fill that 737/A320 up full.

At AA we can pull the connections on our flight, on a normal hub flight I generally see 75%-80% of the passengers are connecting to another city after getting to the hub.