American Airlines Bankruptcy

[CTroyMathis]

I believe it started long before 2001's September. It's probably obvious that it did, but, anyway...here's a recent article documenting AMR's latest plight:

_________________________________

AMR on a heading for bankruptcy
With mounting losses, the 'situation is not sustainable' for American Airlines' parent
http://www.dallasnews.com/sharedcont...amr.5cac0.html

01/23/2003

By ERIC TORBENSON / The Dallas Morning News

AMR Corp. will lose $5 million Thursday, just as it lost $5 million Wednesday and as it will every day for the foreseeable future.

And on Wednesday, American Airlines' parent company said it can't keep soaking up that kind of red ink.

"It's clear from the magnitude of losses we sustained this quarter and this year that our current situation is not sustainable," chief financial officer Jeff Campbell said.

AMR said it lost $3.51 billion in 2002. In the next three months, it predicts an $800 million loss. The continued losses will eat away at the Fort Worth-based company's bankroll, now at $2.7 billion. Analysts say an airline as big as American needs at least $1 billion in cash to stay in the air.

American also has almost no room left to borrow, so if you do the math, the carrier is on a course to join United Airlines Inc. in bankruptcy in about a year.

"Absent a miraculous recovery, AMR needs to achieve material labor savings by this summer to avoid bankruptcy by next winter," said analyst Samuel Buttrick of UBS Warburg.

The news spooked investors, who sent AMR shares down more than 23 percent to $3.77 on Wednesday.

Bankruptcy isn't imminent, analysts said, but the signs aren't encouraging.

"I think American can muddle through this year," said airline analyst Ray Neidl of Blaylock & Partners. "But the business model has changed permanently; American has to change, too."

American executives say, however, that they don't intend to change their strategy. They still aim to carry many more high-paying business fliers than the low-cost carriers by emphasizing American's global network and frequent flier perks.

American believes that plan will work, but only if it can cut spending by $4 billion a year.

Mr. Campbell said he has found $2 billion in cuts. The hard part ahead is persuading its employees to shoulder the rest.

"I absolutely think that we can be a tremendously successful airline – with competitive labor costs – without having to use the bankruptcy process," Mr. Campbell said.

Changes in schedule


AMR also will continue to tinker with its schedule. American Airlines will fly 2 percent less capacity this year, using regional carrier American Eagle to fill the gaps. American's international schedule – where it's seeing better results than on domestic routes – will grow 7 percent in 2003.
A more immediate problem: American now thinks its costs – measured by each seat mile flown – will rise slightly this year, despite the aggressive cost cutting.

That's bad news when there's no sign of a recovery in the crucial business travel market and with the lingering threat of a war in Iraq.

The cost problems include higher jet fuel prices, health care costs and raises due various employee groups, some of which AMR has asked the unions to forgo. Mr. Campbell predicted passenger traffic will be flat this year, meaning there isn't much chance that revenue will grow fast enough to offset those higher costs.

Low-cost competition


The rapid growth of low-cost carriers such as Dallas-based Southwest Airlines Co. has also hurt. American now faces low-fare competition on 82 percent of its routes, up from 75 percent this summer, Mr. Campbell said.
"We don't have any pricing power out there," he added.

It shows in the numbers. AMR's 2002 revenue was $17.3 billion, an 8.8 percent drop compared with 2001 and 14 percent off from two years ago.

AMR actually beat analysts' estimates for the fourth quarter, losing $3.39 per share, or $529 million. Wall Street had predicted a $3.73 per share loss.

The company lost $798 million in fourth quarter 2001. But the year-end loss – including about $1.5 billion in special charges – surpassed the $1.7 billion in red ink recorded in 2001.

There's no easy way out. Saddled with $20 billion in debt, AMR has few options to raise money, such as mortgaging some of its 1,105 aircraft for cash. Investors' appetite for used aircraft has disappeared since Sept. 11, 2001.

American said it needs to renegotiate conditions of $800 million of debt due June 30, and Mr. Campbell said he's optimistic that the company will win more workable terms.

Another problem is AMR's pension plan. The sagging stock market and low interest rates have hurt AMR's pension performance, as they have with most big companies. American will take a $1.1 billion noncash charge – meaning it doesn't count against quarterly earnings, but does affect its balance sheet – to fix the pension shortfall.

Other financing in doubt


The company's access to other financing is "very uncertain," Mr. Campbell said. Major credit rater Standard & Poor's Inc. said Wednesday that it would downgrade some of American's debt ratings because of mounting losses.
"I think my predecessor [former CFO Thomas Horton] said that after Sept. 11 that we were throwing the furniture into the fireplace," Mr. Campbell said. "One could say there's not a lot of furniture left in our house."

Mr. Campbell said he wouldn't confirm a Reuters report that AMR had hired a law firm specializing in bankruptcy.

He did say that all airlines are making prudent decisions in seeking out legal advice with the potential threat of another Persian Gulf War. United Airlines hired bankruptcy attorneys shortly after Sept. 11, 2001, and filed for Chapter 11 protection six weeks ago.

"This is a precarious time for American – we're living on borrowed money, we're losing millions every day, and we are up against forces that we have never encountered in our past," AMR chief executive Donald Carty said in a recorded message to employees.

Meetings with labor


All this news adds pressure to the meetings between American management and labor groups, the next one of which is scheduled for Friday.
"These numbers came as no shock," said George Price, spokesman for the Association of Professional Flight Attendants.

The union has its own financial analysts preparing a report for its board in late February. "We were encouraged by the fourth quarter numbers because they were a lot lower than the last fourth quarter," he said.

Mr. Price couldn't say whether the airline's poor financial outlook would affect his union's approach to talks.

Most analysts expect American's unions to concede something in coming months, but wonder if such savings will be enough.

"Since bankruptcy is a very poor outcome for labor – not to mention shareholders – labor has significant incentive to negotiate," said Mr. Buttrick, the analyst.

______________

What are the possible ramifications of an AMR bankruptcy and the health of the Dallas-Fort Worth International Airport? Do you foresee bailout, buy-outs, or other carriers filling voids...?

[JackZeta]

Where do we start????

On the consumer end,AMR has for years engaged in what I consider "anti-competitive behavior" in regards to the way they've handled their airline in cities with multiple airports(i.e. Dallas) A perfect example of this is the so-called "Wright Amendment",which was pushed through congress by fmr. senator jim wright,who was also a shareholder in AMR. In the late 90's, American launched a ad campaign against new airlines who wanted to setup shop at Love Field to provide nationwide flights,that would cut into AMRs business. Coupling this with the fact that

A) American has finished lower in customer service ratings in the past few years

B) Had its regional business cut due to lower cost carriers such as Southwest and JetBlue.

C) Has made foolhardy decisions with its money(Buying TWA,Building American Airlines Arena in Miami, AAC Naming Rights,ect)


AMR has also hosed ALOT of internal people over the years..be it flight crews,maintainance,baggage handlers..you name it, they've given their people the "shaft" more than once. In a company who claims that their "running out of money", they sure have enough to give the members of the board and senior staff bonuses every year while reservation agents and crews are left hanging out to dry.

In a way, I hope AMR falls on its face. I hope they clean house in the board room and they replace the jerks who are running the show now. Maybe they'll put out a new AA, one which has better customer service, more on time flights,less frills and lower cost per ticket.

[freewaytincan]

Hey, SWA is one of the few that actually can consistently put out a profit. Most others have problems with that.

I say it's great. Maybe rail deregulation will pick up and become a fine way to travel once again.

[JaeTex]

(Un)Fortunately Dallas is probably pretty dependent on the success of American. DFW is the economic engine of Dallas, and the biggest part of that engine right now is AA. AA cutting flights (or switching to regional jets) will be bad for Dallas.

Why don't they make money? Bob Crandall (or the current guy) spoke at SMU Law after 9/11 and said something to the effect that he didn't think airlines as a long run proposition were meant to make a profit, that instead they were an expensive private club! There is a little outfit around Lemmon and Mockingbird that would disagree, but that might show the mindset of AA. As a shareholder of SW Air I hope AA sticks to that philosophy and I can retire thanks to the great Herb Kelleher.

[JackZeta]

Originally posted by JaeTex
(Un)Why don't they make money? Bob Crandall (or the current guy) spoke at SMU Law after 9/11 and said something to the effect that he didn't think airlines as a long run proposition were meant to make a profit, that instead they were an expensive private club!

This is the type of "indestructible elitism" that has killed MANY a company in this country. Both Crandall and Don Cartie(current AMR CEO) have made this company into an "Air Enron" of sorts. I bet if the feds investigated, they'd find cooked books and under-the-table dealings going back for years. This attitude has killed many airlines including:

Braniff
MuseAir
Eastern
Pan Am
Legend

I personally believe that Herb Kelleher had the right idea from day one: Provide a service that both keeps the consumer happy and also keeps their pocketbook full as well.

[freewaytincan]

And he's a smart guy, too. He may smoke, and I don't agree with that, but here's a classic:
Interviewer: "Well now that you have been diagnosed with prostate cancer, Mr. Kelleher, do you plan to quit smoking?"
Herb: "Come on! I don't smoke with my prostate, do I?"

[tamtagon]

Is AA in a better position to avoid bankruptcy again?

[Hannibal Lecter]

^ I sure hope not. I'm short on their stock, so every day that they continue down the road to Chapter 11 brings a smile to my face.

[ihavebeenseen]

Bout freaking time. Why the hell they let this drag on for sooooooo long when the writing has been on the wall is beyond me. Now I guess we wait to see what kind of damage is done to the AAdvantage program or the employee pensions.

http://aviationblog.dallasnews.com/a...ouncement.html

[CasperITL]

The CEO gets a massive golden parachute out of the deal. Total dick move he is allowed to "retire" rather than being kicked to the curb.

[mjblazin]

Why down on Arpey? He did everything that could be done outside of going to bankruptcy. Somehow the unions thought they had a good hand when actually a predator drone was hovering outside waiting to blow up the whole game room. Now the pensions, including existing retirees, and salaries will take cuts and work rules changed to more reflect Southwest processes.

[grantboston]

A very sad day in the history of a very storied and proud company. With over $4b in unrestricted cash, it seems they won't need any DiP financing over the next 18 months of the bankruptcy process. I am interested to see exactly how AA's contract proposals to its unions (as publicized in the past few weeks) differ from the contracts agreed upon through the bankruptcy process. I feel certain they will be less generous and more flexible (to AMR).

A common misconception about AA is that their costs are out of line because they pay too much. That generalization elides certain nuances about the makeup of their workforce. They have a ton of VERY senior pilots, flight attendants, etc. who each draw large salaries, but also have huge non-salary compensation (i.e.: pensions, health care premiums, etc.) as part of their current contract. I saw an analysis that concluded the hourly rate paid to an AA pilot was not terribly uncompetitive, but when uncompetitive work rules, pension and health care liabilities were added in--AA's costs quickly became very uncompetitive. If anything, AMR should hope to renegotiate the terms of its contract to achieve significant cost savings AND hope that its has even more retirements amongst its most senior workforce. Depending on its growth plans, new employees would have to be on-boarded and trained ($$), but AMR may be able to convince a judge to allow relatively-junior (and lower paid) American Eagle pilots to slide over to AA to reduce some of these costs. This could also be accomplished by "outsourcing" more AA flying to Eagle and possibly to other carriers without formally employing the pilots, etc.--totally anathema to AA's unions, but maybe inevitable now. With the Airbus aircraft coming on line in a few years, there will be significant need for retraining anyway.

In any event, I think AMR will get through this; and while this filing was inevitable without new contracts from its labor unions, the choice to file TODAY (eschewing the need for DiP financing) seems like a strategic choice to 1) limit the time spent in Ch. 11; 2) Ensure greater management control over the company since no new DiP lenders will be necessary; 3) it should resolve the bankruptcy process before the 77W/A32X aircraft arrive on the property (new aircraft subtypes, and types to AMR, respectively).

Lastly, I am curious to see how this impacts the Eagle spinoff, merger possibilites and possible collaborations with domestic and international airlines short of a formal merger. The new CEO, Horton, left AMR for a brief time to help merge AT&T and SBC. I don't think the Eagle spinoff will be undone, but I imagine Eagle will have a larger role to play with AA than would be the case without a bankruptcy filing (and the ability to abrogate contracts forbidding certain restrictions on operating flights between AA and Eagle). I can't imagine Horton (or anyone at AA) wants to merge with anyone, but I would have said the same thing about filing for Ch. 11 until this morning. But, if AA can successfully convince a bankruptcy judge to give it very flexible labor contracts, it becomes a really tempting merger target--especially for carriers with similar labor flexibility and junior workforces (jetBlue, IMO).

These are interesting times at Centreport. My thoughts are with the AMR family and its employees; there may be some rough air ahead.

[tamtagon]

Happens frequently in industries suffering through severe consolidation of service providers, the core operation veers too far from customer orientation. Each of the "legacy" carriers had once built a great reputation of providing a superior experience while flying and now they struggle to approximate the perception through frequent flyer rewards, private lounges and in-your-face separation of amenities based on seat size.

[profbarium]

Happens frequently in industries suffering through severe consolidation of service providers, the core operation veers too far from customer orientation. Each of the "legacy" carriers had once built a great reputation of providing a superior experience while flying and now they struggle to approximate the perception through frequent flyer rewards, private lounges and in-your-face separation of amenities based on seat size.

Nobody wants to pay for service anymore. Which is a shame.

My mother has been an American Airlines stewardess/flight attendant for over 30 years. Flights are cheaper now (in nominal dollar terms!) than when she started in the late '70s. Also, planes are much more crowded, the level of on-board service has dropped, and the crews haven't gotten meaningful raises in years. (In fact, they took pay cuts post-9/11 to avoid bankruptcy then. Wages have not been adjusted to back to "pre-crisis" levels.) Count my mom among the (relatively) well-paid "senior" employees counting her days to retirement.

I, for one, love to believe in the proud--almost noble--mythology of flying. Apparently I'm in the minority. With scarce exceptions--international, first class, "boutique airlines"--the airline industry is viewed as a utilitarian commodity. Maybe that's good (it's become very inexpensive to fly), or maybe it's bad (it's become very stressful to fly). Here's hoping some good comes out of this filing, for all "stakeholders".

[tamtagon]

^The first of the remaining legacy carriers to successfully resurrect an air travel product segment that is an amenity of a trip rather than a time period which much be endured will hit the jack-pot. First class on most of the domestic flights is nothing about service and everything about having more personal space that's comfortable.

American ought to investigate what can really be done with the gates they have Love Field. Finding a commercial product which delivers most of the creature comforts of traveling on a private jet at a lower cost with similar day-part availability between principle business and/or pleasure destinations will be less revolutionary to the industry as the Southwest Effect has been, but only slightly less influential.

[mjblazin]

AA's problem is not that they pay each person too much. It's that they have too many persons to do the work and it still takes them longer to do the same work than competitors.

[TexasPlus]

AA's problem is not that they pay each person too much. It's that they have too many persons to do the work and it still takes them longer to do the same work than competitors.

Absolutely correct. I pointed this out several times over the years, the last time on Oct 20th. http://forum.dallasmetropolis.com/sh...l=1#post466892

The question is, now that AA will need to downsize the workforce by at least 1/3, will those remaining pick up the pace, or will they continue to let their anger towards managment get in the way of productivity?

[gchrisbailey]

http://www.nbcdfw.com/news/business/...134803043.html

American (#3) and US Airways (#4) merging would be an outstanding outcome from this bankruptcy...the merged company would jump to #2 (past Delta) and challenge #1 United/Continental quickly.

Keep the American name, but adopt the US Airways color scheme and livery. It's time for the silver planes to go...the US Airways planes always look so much cleaner.

[TexasPlus]

http://www.nbcdfw.com/news/business/...134803043.html

American (#3) and US Airways (#4) merging would be an outstanding outcome from this bankruptcy...the merged company would jump to #2 (past Delta) and challenge #1 United/Continental quickly.

Keep the American name, but adopt the US Airways color scheme and livery. It's time for the silver planes to go...the US Airways planes always look so much cleaner.

only on the outside...

[ksig121]

http://www.nbcdfw.com/news/business/...134803043.html

American (#3) and US Airways (#4) merging would be an outstanding outcome from this bankruptcy...the merged company would jump to #2 (past Delta) and challenge #1 United/Continental quickly.

Keep the American name, but adopt the US Airways color scheme and livery. It's time for the silver planes to go...the US Airways planes always look so much cleaner.

That would be the WORST idea ever. As the article points out, US Airways needs American way more than American needs US Airways. The culture of US Airways makes American seem like Virgin America. It would be a huge step backwards for AA IMO.

As to the livery, the silver birds are the most beautiful planes in the sky (when they are clean and polished...)

[mjblazin]

Merger can happen, but American needs to get leaned out first. It needs to get its new infrastructure in place with new work practices before anyone talks about adding another group, especially a group that does not have any best practices to emulate. Mergers just add more confusion on goals if you do not start from a rock solid foundation. Otherwise the bankruptcy achieves nothing other than making a lot of lawyers richer.

[Tnekster]

^The first of the remaining legacy carriers to successfully resurrect an air travel product segment that is an amenity of a trip rather than a time period which much be endured will hit the jack-pot. First class on most of the domestic flights is nothing about service and everything about having more personal space that's comfortable.

See Pan Am the series for a peek at how it used to be to fly.

[profbarium]

That would be the WORST idea ever. As the article points out, US Airways needs American way more than American needs US Airways. The culture of US Airways makes American seem like Virgin America. It would be a huge step backwards for AA IMO.

As to the livery, the silver birds are the most beautiful planes in the sky (when they are clean and polished...)

Co-sign.

[ihavebeenseen]

If AA can get their cost sturcture down to the levels of US Air...

AA $3,000 per flight hour
United $2,800 per flight hour
Delta $2,500 per flight hour
U.S. Airways $2,000 per flight hour

I would rather see AA roll up Alaska and Jet Blue. Their route network really compliments AA and their culture is what is needed at Center Point. Another thing AA really needs are E-Jets which Jet Blue already has.

However this stupid obsession with being the largest airliner in the world makes me feel that a US/AA tie up is inevitable.

[slfunk]

only on the outside...

Thats what I was thinking. I have flown them a couple of times going to NYC..... filthy on the inside.

[CasperITL]

"The Arena" the taxpayer funded "arena" could lose it's American Airlines Center name:

http://www.pbs.org/nbr/site/onair/tr...rights_111129/

Or at least it should be scrubbed, bleached and painted over. Even though it's literally etched into the seats. Like Adelphia and Enron, AA needs to lose their sponsorship of the Dallas and Miami venues that carry the AA name. I think companies should pay up front for naming rights, not on a yearly basis over 30 years or more.

[ihavebeenseen]

The same thing that happened to the Continental Area, United Center and Delta Center when their respective companies went through BK is going to happen to The AAA and The AAC, nothing.

[mjblazin]

They do pay on a yearly basis and it's the creditors that make the decision. They agree if the squishy positive cash flow from exposure supports the very real negative flow from the annual payment. Their only concern is maximizing the cash flow for the airlines to pay the bonds.

[TexasPlus]

Bonds, did someone mention bonds?

By Martin Z. Braun

Nov. 30 (Bloomberg) -- Few may feel more pain from AMR Corp.’s bankruptcy than owners of $49.5 million in unsecured municipal bonds, due to be paid tomorrow and guaranteed by American Airlines.

The bonds, which traded at 99.7 cents on the dollar as recently as Nov. 15, tumbled to 16.5 cents following AMR’s bankruptcy yesterday, for a loss of as much as 83 percent. Alliance Airport Authority Inc. sold $125.7 million of the debt in 1991 to build an engineering and maintenance base for American in Fort Worth, Texas, the airline’s home town. MacKay Shields, an investment unit of New York Life Insurance Co., reported holding $4.2 million of the debt on Sept. 30.

“That’s painful -- they missed it by two days,” said Matt Dalton, who oversees $925 million of municipal securities as chief executive officer of Belle Haven Investments Inc. in White Plains, New York. “American had a fair amount of debt that was due on Dec. 1, plus interest payments on other maturities.”

Among its $29.6 billion in liabilities, AMR and American backed $3.2 billion of securities called special-facilities bonds sold through airports and municipal authorities to pay for gates and maintenance hangars in cities such as New York, Los Angeles and Dallas. American is the last large full-fare U.S. carrier to seek protection after the Sept. 11 terrorist attacks.

American, which leased the airport facilities, and AMR guaranteed payment of the Alliance securities, according to an offering document. About $76.2 million of the debt was redeemed in 2004, according to data compiled by Bloomberg.

Mike Petty, who manages New York-based MacKay Shields’ Mainstay High Yield Municipal Bond Fund, didn’t immediately respond to a telephone call seeking comment on the holdings.

Capital Research & Management Co., a mutual-fund company based in Los Angeles, reported owning $2.5 million of the Alliance bonds as of June 30. Neil Langberg, manager of the firm’s American High-Income Municipal Bond Fund, declined to comment.

http://www.businessweek.com/news/201...ndholders.html

[profbarium]

If AA can get their cost sturcture down to the levels of US Air...


I would rather see AA roll up Alaska and Jet Blue. Their route network really compliments AA and their culture is what is needed at Center Point. Another thing AA really needs are E-Jets which Jet Blue already has.

However this stupid obsession with being the largest airliner in the world makes me feel that a US/AA tie up is inevitable.

Word.

[profbarium]

"The Arena" the taxpayer funded "arena" could lose it's American Airlines Center name:

http://www.pbs.org/nbr/site/onair/tr...rights_111129/

Or at least it should be scrubbed, bleached and painted over. Even though it's literally etched into the seats. Like Adelphia and Enron, AA needs to lose their sponsorship of the Dallas and Miami venues that carry the AA name. I think companies should pay up front for naming rights, not on a yearly basis over 30 years or more.

Isn't stadium sponsorship a marketing expense? Might it be reasonable that whatever AA is spending to pin its name on these stadia is a fair price--and might help it out of bankruptcy?

[Hannibal Lecter]

http://www.nbcdfw.com/news/business/...134803043.htmlKeep the American name, but adopt the US Airways color scheme and livery. It's time for the silver planes to go...the US Airways planes always look so much cleaner.

The unpainted exterior saves them a bunch of money on gas (less weight) and maintenance (less painting). Of course the big question has been what are they going to do with the new 787's, which don't have a shiny metal fuselage.

[CasperITL]

Isn't stadium sponsorship a marketing expense? Might it be reasonable that whatever AA is spending to pin its name on these stadia is a fair price--and might help it out of bankruptcy?

Sure. Same with the luxury boxes, catered food and platinum level parking.

Meanwhile.....they cannot pay the mortgage on their repair facility at Alliance. Erks me that in the same news conference that they declare bankruptcy, they brag about buying hundreds of new aircraft. Screw the bagholders of the stock and the bonds. Screw them, right?

[TexasPlus]

Sure. Same with the luxury boxes, catered food and platinum level parking.

Meanwhile.....they cannot pay the mortgage on their repair facility at Alliance. Erks me that in the same news conference that they declare bankruptcy, they brag about buying hundreds of new aircraft. Screw the bagholders of the stock and the bonds. Screw them, right?

Of course, that is the whole idea behind bankruptcy...make a serious of bad business decisions, operate inefficiently for extended periods of time, then rather than go out of business like a failed business should, you screw anyone you owe money to, then start over with a new financial paint job.

[gchrisbailey]

As to the livery, the silver birds are the most beautiful planes in the sky (when they are clean and polished...)

They are also the oldest birds in the sky...part of the reason I prefer to booking a flight on a US Airways 737 or A320 to a 40 year old MD-83. Silver bird is right.

[tamtagon]

No one wants to pay for service.

[LoneStarMike]

The same thing that happened to the Continental Area, United Center and Delta Center when their respective companies went through BK is going to happen to The AAA and The AAC, nothing.

Delta Center in Salt Lake City hasn't been known as Delta Center since November of 2006. It's now Energy Solutions Arena.

After Delta Air Lines declined to renew their 15-year naming rights contract, which expired on September 30, 2006, the stadium's owner, Larry H. Miller, opted to sell naming rights to EnergySolutions, a low-level nuclear waste disposal company headquartered in Salt Lake City.[17] The new name was unveiled November 20, prior to the Jazz home game against the Toronto Raptors. Two stickers were placed on the court, covering up the arena's old name with the new one.[18] The temporary logos were replaced with official logos on the court sometime in December.

source

LoneStarMike

[Tucy]

Delta Center in Salt Lake City hasn't been known as Delta Center since November of 2006. It's now Energy Solutions Arena.



source

LoneStarMike

Similarly, Continental Airlines Arena is now the Izod Center, but neither the Continental nor the Delta arena re-namings had anything to do with their bankruptcies. Both airlines merely declined to renew their naming contracts, in the normal course of business.

[ksig121]

They are also the oldest birds in the sky...part of the reason I prefer to booking a flight on a US Airways 737 or A320 to a 40 year old MD-83. Silver bird is right.

While that may be true, airplanes are not like cars. For all intents and purposes, those planes have probably been rebuilt 5 times over their lifetime. It's not like you see them falling out of the sky or blowing their top like some of the "newer" 737's that are out there. But, I guess for an airline like US Airways that is NEVER on time, having a newer plane is kind of a necessity since their passengers spend so much unplanned time in them. Just sayin'...

For my dollar, I would take the older planes, "better" customer service and reliability that AA offers over US Air any day.

[BigT3x]

They are also the oldest birds in the sky...part of the reason I prefer to booking a flight on a US Airways 737 or A320 to a 40 year old MD-83. Silver bird is right.

The other airlines outsource their maintenance to Hong Kong and South America. I'd rather have the AA plane that's maintained in Tulsa than the US Airways plane done by people who don't know enough English to even read the maintenance manual.

[mjblazin]

The other airlines outsource their maintenance to Hong Kong and South America. I'd rather have the AA plane that's maintained in Tulsa than the US Airways plane done by people who don't know enough English to even read the maintenance manual.

What do you think these places are - something like those Indian boat wreckers? Ripping metal with their bare hands? While I don't know any aircraft maintenance workers, I work with people in similar trades. They are world class. I doubt many north Texans could make the grade. Also, I doubt anyone is sending planes to Hong Kong for maintenance.

[TexasPlus]

The other airlines outsource their maintenance to Hong Kong and South America. I'd rather have the AA plane that's maintained in Tulsa than the US Airways plane done by people who don't know enough English to even read the maintenance manual.

Oh you mean like the improvised fork lift procedures AA used in routinely changing aircraft engines that resulted in the total loss of flight 191?

AA-191-Crash.jpg dc10crash-thumb-580xauto-21216.jpg 300px-AA191-crash-site.png
http://en.wikipedia.org/wiki/America...nes_Flight_191

[ksig121]

Oh you mean like the improvised fork lift procedures AA used in routinely changing aircraft engines that resulted in the total loss of flight 191?

AA-191-Crash.jpg dc10crash-thumb-580xauto-21216.jpg 300px-AA191-crash-site.png
http://en.wikipedia.org/wiki/America...nes_Flight_191

Did you seriously quote an accident that occurred in 1979? LMAO! The outsourcing of aircraft maintenance has been a relatively recent phenomenon. Additionally, there are facilities that are used in Hong Kong...

http://www.npr.org/templates/story/s...ryId=113877784

[mjblazin]

I'm sure they fix planes there, maybe for some unique center of excellence. I doubt it it is a global center of choice for most work. It costs more to work there than 90% of the industrialized world. If work is done there, it's not to leverage low paid, unskilled workers that can't read instruction manuals.

[profbarium]

Sure. Same with the luxury boxes, catered food and platinum level parking.

I'm not sure I understand the relationship. Please clarify.

[Sam Watkins]

...Meanwhile.....they cannot pay the mortgage on their repair facility at Alliance. Erks me that in the same news conference that they declare bankruptcy, they brag about buying hundreds of new aircraft. Screw the bagholders of the stock and the bonds. Screw them, right?

One (only one) of the reasons AA is where they are is that those MD-80s use something like 40% more fuel than a newer 737. The layout of the MD-80 makes re-engining impossible. Fuel prices have been eating American alive for years and fixing that has to be one of their highest priorities. It doesn't matter how many full flights you have if those engines cost more to run than you can charge for tickets. Plenty of busy restaurants go under the same way.

Forbes had an interesting bit about the customer service vs. commodity angle yesterday:

http://www.forbes.com/sites/adamhart...cy-is-failure/

[mjblazin]

Sure. Same with the luxury boxes, catered food and platinum level parking.

Meanwhile.....they cannot pay the mortgage on their repair facility at Alliance. Erks me that in the same news conference that they declare bankruptcy, they brag about buying hundreds of new aircraft. Screw the bagholders of the stock and the bonds. Screw them, right?

The new planes are financed via the manufacturers and collateralized by the planes. I have not heard anyone say the new planes won't easily pay for themselves, sort of what the convention center hotel is supposed to be. AA did not issue new debt. The creditors likely do not see the new planes as an issue unless they reduced market to the point that any of planes become extraneous.

[CasperITL]

I'm not sure I understand the relationship. Please clarify.

AMR has luxury boxes that come with catered food and the underground parking level at the AAC. Since the corporation will say that "the client synergies created in a dynamic atmosphere of an entertainment venue return 10x the revenue" they will argue to keep them.

[CasperITL]

The new planes are financed via the manufacturers and collateralized by the planes. I have not heard anyone say the new planes won't easily pay for themselves, sort of what the convention center hotel is supposed to be. AA did not issue new debt. The creditors likely do not see the new planes as an issue unless they reduced market to the point that any of planes become extraneous.

The new debt does not anger me. It's the old debt they have chosen not to pay as agreed that pisses me off. Since the Supreme Court gave corporations the same rights as a human being a few years ago, what kind of bum deadbeat would you label AMR? Maybe a 30k millionaire that maxed out all his credit cards, bought all sorts of extra junk he cannot afford...then declares bankruptcy. But brags to all his friends that next year he is buying all new stuff.

Glad I don't own AMR stock. I would have steam coming out my ears.

[Tnekster]

Where is puddinhead?