"....Today AMR reported a net loss of $375 million for the first quarter of 2009." "....Eagle generated a pre-tax profit of $4.5 million, just under one percent of the $492 million in revenue for the first quarter."

It might be small but at least it's something.

 

All smoke and mirrors. Who paid for AE's fuel?

 

I have a question about this statement. Please don't take this as a disrespectful challenge, but as in an opportunity to educate. I admit to a severe lack of knowledge about this companies operating procedure. Imagine for a moment you are an instructor in an airline business class and I'll ask a question and you answer it.

What is the motivation to deceive about how these profits are calculated? As I understand it, it is in the companies best interest to be forthright about its operating costs, correct? In order to maintain or increase the value of a companies stock, it has to be honest with it accounting procedure. Wouldn't omitting fuel cost from its operating cost be a glaring dishonesty? Especially if it wants to "sell?" Does not Eagle have its own subset of financial statements?

I understand that there is a round of negotiations with the mainline and the negotiators would like to be able to point at certain aspects of its financial statements to gain leverage, but it sacrifices stock value if it does. Most companies have a major goal to increase the value of their stock. I would think that being deceptive (or just too liberal) with their accounting practices in order to gain negotiating leverage at the expense of their stockholders' trust would not be in the companies best interest. Am I missing something here?

 

Most regionals operate on contracts to provide a certain amount of capacity in exchange for a fixed, contracted fee. Since fuel costs can fluctuate, a regional which pays for it's own fuel would have to pad that cost by a hefty margin to account for large price spikes...they would charge for a worst-case scenario at all times and pocket the extra when fuel costs are low.

Since regional operating margins are usually slim, no regional would want to contract flying with fuel costs "at risk".

For these reasons, regional contracts almost always stipulate that fuel is paid for by the major airline partner. In most cases, excluding these reimbursed fuel costs from financials is obviously correct.

In the case of eagle, they are actually owned by AMR (The AA holding company). Since they are owned by the people they "contract" for, it might makes sense to have them pay for their own fuel to simplify accounting. Ultimately AMR combines the P&L of AA and AE, it doesn't really matter where the fuel cost is tacked on. If they charge AA, eagle makes a profit. If they charge AE, then AE has a loss and AA has slightly better (but still losing) numbers.

However...AMR has been trying to sell off eagle for several years. In order to make them a viable acquisition, they need to be setup like a stand-alone regional. Nobody would consider buying AE if they were locked into a contract where they had to pay highly unpredictable fuel costs.

In the sense that AE is operated financially like a stand-alone regional, they did make a legit profit. So did some other regionals, based on fixed, guaranteed contract income and few variable costs.

 

good response, rick

 

just think of the even bigger profit they make next quarter when they don't have to pay for my superior services any longer...


anyways...rumor starting in the school house that their may be more furloughs come the end of the summer?

i sure hope not...

 

Maybe if DFW Executive can start completing some of their flights things will start to look up staffing-wise. 30% cancellations on ATRs? Pretty sad- why is it that those same airplanes flew out of MIA and SJU for years and years without even a fraction of the problems Dallas seems to be having?

I think alot of guys forgot what business we are in- we dont get paid to write in a book. It's time to start getting people from point A to point B guys. Otherwise there will be alot more furloughs.

 

what kind of a statement is that??? We get paid to fly safely. I dont get paid to fly a broken airplane or to put my tickets at risk for doing so. If they want better reliability talk to maintenance or get newer planes but dont ask the flight crews to fly broken airplanes.

 

It means that if you can't do at least as well as San Juan you have some real serious problems. Those same airplanes flew without cancellations before going to Dallas (in fact they are the newest in the fleet). The crews writing up BS stuff need to get their heads screwed on straight. Oh yeah and they aren't crashing planes or getting violated in MIA or SJU. In fact most of the ASAPs are coming from ATR DFW.

If they move the planes back to the Caribbean guess where all the junior guys/gals are gonna end up...either on the street or on the Rock.

 

Well in STL they are shutting down 5 gates.