American Eagle Spin OFF will be like Express Jet?
 

I have been watching these forums for a long time now and finaly have the privilage of posting as a registered member.

So hear goes.

AMR announced in november that it will divesting Eagle and as a result I have seen a lot of talk on this forum about its future. some seem to feel it will be like express jet and expand its service on its own or some feel eagle is going under in four years and all its flying will go to other regionals willing to fly for cheaper. As a new hire for Eagle (Class Date Jan 21 ORD) and an interviewie for Express Jet, tomarrow (Dec 12), I would like to see what people on here realisticaly think will happen to Eagle and its pilot labor force. Is the airline, on its own, bound to expand and therfore higher new pilots thus shortening the upgrade time or will in the grand sceem of things nothing happen. On the flip side, what is going to happen with express jet. I hear nothing but good things from the pilot group and have many freinds there, but will the company be stable enough for the next few years for a new hire to not have to worry about a potential furlough? And will the losses its going through right now, becuase of the start up costs associated with its branded flying, lengthen the upgrade time to captain?

Thank you for responses.

I fly for American. I'm an FO.
Here is my honest answer. I have no clue what's going to happen. Nada, Zero.
AMR continues to amaze me. Every day i've worked here, they'll do something and i'll think "well things can't get any worse or they can't screw things up any worse than this." Yet, the next day something else pops up and you (I) just shake your head in utter disbelief.

The fact of the matter is that nobody has a crystal ball, we can just make educated guesses. I try to rationalize about why/what/when of this:

-AE has a real senior pilot group (expensive labor costs compared to other regionals)

-AE flies outdated aircraft that and inefficient and expensive to operate (Saabs are breaking everyday, ATRs same, 37/44 seat RJs that arent efficient)

It would take a huge amount of cash to continue to run AE at the current state, and an even larger amount of money to buy new, more efficient a/c. The pilot labor costs arent going to drop anytime soon, unless you can take the top 1500 pilots and get them a job somewhere else.

I think AMR will contract several regionals in the next few years to fly portions of the current AE routes. It will be much cheaper for AMR and make money for their shareholders(pilot costs would be cheaper, equip would be larger/better). For AE pilots I expect the overall pilot group to shrink through attrition and the upgrades will remain about the level they are at now (7 yrs). In the end I expect AE to be primarily a DFW and ORD based carrier flying some 50 seaters and a few 70 seat CRJs.

As for Xjet, I think they are having a set of their own problems, but the pilot group is rotating out because CAL hires large numbers of XJet pilots. If I had to chose between the two I would go XJet.

It is interesting that weather is such a critical aspect to aviation. I mean, in aviation you really cant do much of anything with out giving the weather some serious considerations. What I have learned about weather since Ive started flying about a little over a year ago (and now have my private+instrument and almost my comm) and what everyone else here knows... is that weather can not be predicted. We can make a few guesses but the only way to know what the weather is going to be is to wait and see.

It is very interesting that weather predictions and industry predictions are so unpredictable. Sure if there is a high pressure over illinois I can say with some certainty "It will be clear skies tomorrow" but with that same certainty I can say "There will be no terrorist attacks tomorrow."

I am sorry if this has gotten way off topic and didnt answer the OPs post... but I cant help but feel that speculating, while can be useful, has no real impact in the long run. especially when we are talking more than a year.

Those just be my 2 cents...dont spend them all in one place.

Unless you are EXTREMELY dead set on being in ORD...i.e. you have a wife and kid there who don't want to relocate, or a dying father in a hospital near ORD, or something to that effect, why on Earth would you go into a company with a best-case-scenario of a 4-5 year upgrade, when you could go to a company with a worst-case-scenario of a 4-5 year upgrade?

There is a REASON why Eagle hires at 400/50 while XJet needs around twice that to be competitive.

Remember, if AA wants to sell off Eagle, they're going to have to have some pretty good terms to interest any potential investor. No fool would just buy the airline at or near a preimum, without gurantees that AA won't dump them within a couple of years. If you really want to go to AE, this may actually work out to be a really good time. I came to XJT two weeks after the first anouncement on the 69 jets being removed from the CPA. I was concerned, but I'm darn happy I didn't turn back.

Good Luck,

Onfinal

Its pitiful when 800 hours is competitive to get a job in a jet carrying people aroun. in my opinion. But on that same deal, I wouldn't go to eagle. At least express flys for someone other than continental so they have more business to fall back on if/when continental takes more flying away. who knows whats gonna happen with these companies but why would you go somewhere that most likely has trouble in the future.

I don't think you can make an analogy between being a new hire at XJet and a new hire at AE.

XJet has a shorter upgrade, much less expensive labor costs since their captains are newer/lower on the payscale, and a better fleet. In addition as was mentioned before, CAL is still hiring XJet guys, causing movement and keeping labor costs down.

XJet can bid and do branded flying for 10-20%+ less than AE could, due to their vastly different cost structure.

Unless AA gives them darn near exclusive rights to their feeder flying, and starts hiring off their captains, I still don't think it's going to be a good place to start a career.

what I'm saying is, even if AE were released to do branded flying or bid on flying for other carriers, they'll easily be out-competed by everyone else out there unless they can figure out something more productive for their senior captains and FOs to do, like fly bigger airframes with more pax on them.

But 9E is that much better of a place?

What are the chances do you think that they willl keep open their BOS base????? Just curious cuase i almost went to EAgle because of that reason, but I like my decision that I made to come here to ASA, the BOS--ATL comute is cake....but i have a lot of friends over at Eagle and they seem to think AMR selling themis a good thing....thoughts on both BOS base and AE being sold??

I agree snipper. It's always a gamble, sometimes I think I'd have better luck playing my odds in Vegas. There's speculation on all sides of the argument.

I'm sending Eagle my application after Jan1. The only reason I'm choosing AE is b/c I live in Dallas, I love it here, and I don't have the flexibility to relocate. For me, living in my domicile and not commuting is worth its weight in gold!

The only thing I'm fairly certain of is that AE has a contract with AA until 2013 (please correct me if I'm wrong). So, there will be flying to do. Sometimes the biggest gambles have the biggest payoff...only time will tell.

Two quotes from wise pilots that mentored me:
1. When it comes to planning your aviation career just remember, Man makes plans, God laughs.
2. "Career? I've never had a flying career, just a series of 'gigs'!"

All the best to you!

BW

Might not be a bad place to get some 121 experience, then move on.

love your avatar cfii2007 lol hilarious

a good guess at what upgrade at xjet would be like is somewhere in the ballpark of 2.5-3.5 yrs. Both eagle and xjt are great places to work but each has their problems. Any regional is extremely risky and a good place now could be the worst in 2 yrs time... go somewhere with a solid contract, good pilot group, and a base that is near where you want to live. i dont think you would regret coming to eagle, xjt, skywest, ... you get the idea. good luck!

"I personally believe that U.S. Americans are unable
to do so because, uhmmm, some people out there in our
nation don't have maps and uh, I believe that our, I,
education like such as uh, South Africa, and uh, the
Iraq, everywhere like such as, and I believe that they
should, uhhh, our education over here in the US should
help the US, uh, should help South Africa, it should
help the Iraq and the Asian countries so we will be
able to build up our future, for us."

My opinion:

AE will be spun off to the stockholders. No one can afford to buy them outright, nor would anyone want to inherit such a large and expensive labor pool or a large fleet of aircraft with diminishing economics.
AE will strike a deal with AMR to maintain the current work load for 3-5 years. AE will be compensated per block hour or per departure at a reduced rate. This rate will be higher than the rate other regionals could fly at, but it will be a savings to AMR. Also, this will protect the continuity and quality of service for AMR. No one or even combination of regional carriers could assume the workload AE currently flies for years to come. That is a lot of aircraft and infrastructure to pull out of nowhere. After the 3-5 year period, AE will have the flying put out for bidding, but even then AMR can only afford to give away so much AE flying at a time. Just look at the cluster CAL created by spinning 44 aircraft lines from Xjet to CHQ. Any reduction in flying at Eagle will be slow and measured.
Some possible hiccups as far as the Eagle pilot group that I could forsee:
AE (once on its own) could sell off some assets, such as the Executive certificate, as a fund raiser. This is a clean way to offload aircraft and pilots at the same time. Or, AE could sell off a few aircraft at a time. Other nations are still trying RJs and used props. In all, I see eagle slowly becoming a pre-CHQ Xjet... a stand-alone company that eats off of one plate, just for a little less than before. Over time, it may see some of its flying auctioned off, but that is years down the road. As long as AMR gets the same Eagle product for a reduced cost (which can still be profitable for Eagle), then things will be pretty stable and unremarkable.

BINGO,we have a winner.... I was going to post some long and rambling thoughts, on this scenario myself, but you pretty much took the words out of my mouth.

Like us here at XJT, AE will either adapt, or slowly atrophy and die. However any major changes will likely be gradual. Nobody will win if AMR chops Eagle off at the knees, and brings in a handfull of various low bidders, overnight; not Eagle, Not American, not AMR shareholders, not the employees.

The jury is still out for another 3-5 years on how this thing will really pan out for Express Jet. There are lots of risks. The status quo is no longer a viable option, if we are going to suceed long term. That being said, I think we have a good team over here. We still have significant resources, and no one is going to roll over and play dead. The burning question/concern in my mind is, what are the true break even economics of 50 seat Regional Jets in stand alone service, with $100/barrel oil, even for a well run operation?

Diversification of revenue streams is critical. Branded service is a huge part of this. Hopefully, with big risks will come big rewards. History has not been kind to start up airlines since deregulation, but this spin off of existing, fairly well capitalized operations, is pretty much uncharted territory. Stay tuned...

Here is the scenario that everyoine here at the Eagle BNA station likes the best (whether it has any chance of coming to reality I do not know).

Virgin America is having trouble expanding its routes because they can't get landing slots or gates at many of the eastern and southern airports. If they were to buy Eagle they would have an instant growth that would also include the caribean. They could then turn around and compete with American in most of their cities. There are not many cities at all that American flies into that eagle doesn't also serve. And at a few of the cities Eagle employees actually do the ground handling and gate work for the American Flights.

We also see this as a plus for eagle because we can now buy larger regional jets without worrying about the scope clause in the American pilot contract.

This is just my 2 cents.

Who owns/leases the gates and slots, though, AMR or American Eagle? I am not being fesicious....I really don't know. I think the chances that American would let go of their real estate/landing rights in profitable markets, as a part of the Eagle sale are slim to none.

They might sell you the aircraft, but unless your flying feed for American, you're gonna be on your own as to where to fly 'em and park 'em.

AND AE already has a highly experienced (albeit high cost) group of pilots and FOs at the company who don't want to leave (otherwise they would have easily already went to a major/UPS/FedEx)...if Virgin did that, they could put those high-dollar AE senior guys on bigger, newer airframes, thus reducing the per pax per mile cost relative to flying ERJs. Then the guys on the ERJs would be more junior...so overall, Virgin America + AE could actually outcompete AA...newer more fuel efficient large aircraft flown by VA mainline (instead of AAs MD-80s) creating a place for the senior AE pilots to go, lower costs on the ERJ routes due to more junior pilots, and dominance in the caribbean, which could also cross-feed both Virgin domestic and Virgin Atlantic's tourist travelers. Not to mention Virgin has plenty of cash to make it happen, even if it's a long-term play...just look at Virgin Nigeria...that's definitely a long-term play with plenty of risk involved...Virgin's business strategy has always been founded on taking opportunities that more conservative companies are too risk-averse to take. I could see Branson pushing for something like this through back channels, even if VA has been forced to distance itself from the Brits.

I was wondering the same thing...but even if AMR has all the gates, it would make it even more difficult to sell AE at a decent price if all you're getting is a bunch of older planes, an expensive pilot group, some guaranteed flying, and the executive certificate.

I'm not sure what the economics are, but has anyone considered whether AE could take some of the way-senior captains and convert some of the ERJs into the bizjet version kind of like XJet does? They could create a sizeable charter fleet overnight (certification?), and maybe even venture into all biz-class flights on major routes since they already have the gates. Just throwing that out there.

they cannot compete a/established American routes however...

The thing is, none of what we are speculating would happen for a while. For AMR to make any money off Eagle they need to be worth something (it doesn't matter if they IPO it, sell it to a private equity investor, hedge fund, ect.) it has to be worth something for it to become sold for the "right price."

Because of this AMR will load Ealge up with debt and then inflate Eagle's CPA and provide some short term stability (2-3 years is my guess) by locking AMR into that flying. When the newly generated CPA allows them, AMR will pull flying from Eagle and put it out to bid or lower Eagle's rates. Now that they got the high price per share they needed from the Eagle sale (assuming an IPO) the will no longer need Eagle. They will make it difficut for Eagle to retain flying for current rates, and/or keep leased aircraft.

The result will be AMR getting cash value for the sale of Eagle, and cheaper flying be either lowering the value of Eagle's CPA, canceling parts of the CPA and trying to give their airplanes to a less expensive carrier, or binding Eagle to cheaper rates via other methods (MFN clauses come to mind.)

For all this too hapen however AMR will need to create value in Eagle by giving their CPA some stability (that can be washed away) and an impressive fees for depature or cost plus percentage contract. Due to these things Eagle won't change for a few years. It'll be kinda like what happened at ExpressJet.

JMHO

That is a question we have been asking ourselves. I do know that here at BNA the jetbridges are owned by American (that is why they are so crappy). I think the gates are as well. AMR still owns the B, C, and D concourses as well as the International gate that is in the A concourse from when BNA was a hub. They lease the D concourse (eagle's old spots) to the Transportation Safety Administration for office space, and about half of the C concourse is leased to Southwest. Concourse B is leased by NW, DL, US JetBlue and Continental. Out of all the gates that AMR owns here, less than 10 are used by AMR and 4 of those we use here at eagle.

As much as you would like to believe it, pilot wages are a very small amount of the equation in terms of cost. Here is an example for: An airliner pulls up to gate, engines running and burning a significant amount of fuel. If you are at a good airline you as a pilot are still getting paid. You are waiting there because there arent enough $7 an hour rampies to marshall you in. You finally get parked and wait another ten minutes for a jet bridge jockey (probably making 10 an hour) to pull the bridge up. In this twenty minute period the company has paid for twenty extra minutes of flight crew wages, and probably ten minutes of $100 dollar a barrel of oil/gas. This happens an average of three to four flights a day per aircraft, multiplied to by 365 days per year. Lets just say the average flight crew combined is making $110 an hour, and this delay results in an extra hour of block time per day. 110 x 365 = 41000 ish. Now lets say that it is a fleet of 50 aircraft, which results in a yearly cost of 2.1 Million. Now if we were to take the same scenario and add fuel into the equation. Lets say the burn on the ground is 1200lbs per hour, which is about 171 gallons of fuel. Now lets take jet A at $4.00 a gallon. So approximately $680 per hour of fuel burn at a gate. 680 x 365 = $249,660 for one aircraft per year to wait for rampies (remember these are $7 an hour rampies) 249, 660 per aircraft for a 50 aircraft fleet results in 12,483,000 in cost. 2.1 million in pilot wages vs. 12.4 million for fuel cost, all because most companies wont staff there ramps properly. Do you still believe that a senior pilot group is hurting a company? These numbers arent 100% accurate but they are pretty damn close. If you put the kool aid down for a few days its amazing how clear some things become.

Ok So how about this situation. I live in LA have about 400/100. My life is in LA and cannot be changed for the time being. So I have been thinking about picking AE because of the domicile preferential choice. I am looking to just build my hours until I am ATP qualified and then a few more maybe 2000 and then move to more of a corporate job that awaits me. So with all this talk if my plans find an airline just to build some time and 121 experiance would AE be fine for a couple of years?

If you gotta be in LA and you have 400/100 and you just need some 121 time up to 2000 hours then heck yeah, AE is perfect for you!

Thats all well and true, maybe ya'll should spend your breath dissuading people from going to Mesa, GoJets and the likes, so that we can actually make progress in our industry instead of regressing....just a thought from a simple turboprop FO.

well ORD here I come...
 

Didnt get the Xjet job. They seem to be realy tight in the interview proces. I didnt make any mistakes and I thought my HR interview went pretty well. I have 1035 and 200 multi all in Cessna's and Pipers and I didnt get the job? I think they selecting about 2 people out of 22 that interviewed that day. They said they had many people in a pool and no set plans for a class. the best estimate they could give us for the next class date was March.

I think Eagle will be a good place to work for a while maybe not a career but a nice place to get initial expereince. Plus if a Virgin Sale ever goes through, WOW! but I think somthing like that is doubtfull. who knows. thanks for all the responses on my first post guys. hope to see some of you out there on the line in the coming year.

Mav, I do not think you will regret your decision.