|
[QUOTE=FWAAA;18485587]
Because the pilot pension permits retirees to withdraw their defined benefit ("A plan") as a lump sum upon retirement, not terminating the plan (but instead merely freezing it) will result in a massive cash drain on the plan that will likely prove unsustainable. QUOTE] The "A plan" lump sum payments have been discontinued under the new agreement; all retiring pilots as of the chp 11 filing have to take the annuity. So the doomsday scenario that you outlined doesn’t apply. (i.e., they aren't morons and saw what happened to Delta) Also the cynical side of me thinks that Delta did it on purpose to have an excuse to terminate the pension at a later date. I am sure that AA's financial actuaries have the cost of the pension freeze vs. cancel, and I am pretty sure that the number has been normalized into the cost savings that they are going to extract from the contract cancellations. It's a bone that was thrown to the PBGC and the admin judge that allows them to defer some of the cost at the same time being able to extract more immediate savings out of the contract rewrites. As to red herrings, I will answer with another one. Why does everyone think it's a good idea for a company to be able to unload debts that it incurred on an agency that eventually the taxpayers are on the hook of bailing out. |
[QUOTE=edwards183;18485957As to red herrings, I will answer with another one. Why does everyone think it's a good idea for a company to be able to unload debts that it incurred on an agency that eventually the taxpayers are on the hook of bailing out.[/QUOTE]
That's easy:
|
Originally Posted by edwards183
(Post 18485957)
The "A plan" lump sum payments have been discontinued under the new agreement; all retiring pilots as of the chp 11 filing have to take the annuity. So the doomsday scenario that you outlined doesn’t apply. (i.e., they aren't morons and saw what happened to Delta) Also the cynical side of me thinks that Delta did it on purpose to have an excuse to terminate the pension at a later date.
Originally Posted by edwards183
(Post 18485957)
I am sure that AA's financial actuaries have the cost of the pension freeze vs. cancel, and I am pretty sure that the number has been normalized into the cost savings that they are going to extract from the contract cancellations. It's a bone that was thrown to the PBGC and the admin judge that allows them to defer some of the cost at the same time being able to extract more immediate savings out of the contract rewrites.
Originally Posted by edwards183
(Post 18485957)
As to red herrings, I will answer with another one. Why does everyone think it's a good idea for a company to be able to unload debts that it incurred on an agency that eventually the taxpayers are on the hook of bailing out.
US, UA and DL all unloaded their woefully-underfunded pilot pensions on the PBGC. IMO, if AA does not, it has failed. |
Originally Posted by FWAAA
(Post 18486526)
AA stopped the lump sum distributions on the date it filed for Ch 11 because the PBGC prohibits such distributions where the PBGC may end up taking on the pensions. AA has not yet publicly said that it has resolved the issue if it freezes (instead of terminates) the pilot plan. Once AA's plan of reorganization has been confirmed, and AA is not under bankruptcy protection, the pilots would again be free to withdraw their retirement benefit as a lump sum.
The interesting thing is that if the proposed A&B plan changes happen, pilots will get a 13.5% contribution to their 401(K) funded by AA. That amount might put a bunch of senior pilots over the pre-tax max contribution limits and they could be taxed on the excess amount. The 1113 plan is pretty onerous to labor. If the judge lets most of it stand there will be a lot of productivity and savings. The PBGC would have fought a protracted court battle to keep the pensions from being terminated, in which AA might have lost. Especially with $4 billion in cash, and lot of hidden value (hello, AAdvantage program. Conservatively it's worth $5-7 billion). It was a fight that AA unwilling to get all bruised up about. I don't get so worked up about pension obligations on the balance sheet. It's basically an actuarial game that companies push and pull depending on what story management wants to spin. |
Rather than start a thread for this...
AA Chief labor negotiator to "retire", and the 20% cuts expected of union labor is applied to officer level at corporate with four other "retirements" and reassignment to the ominous "special projects" position.
In other news obtained from various sources, AMR posted an $807 million loss for March, however $856mm is on special items related to reorganization - $15mm spent on professional fees and $841mm on aircraft financing do-overs and lease rejections. Ex special items it made $49mm for the month and ended up with $4.8bn in cash (isn't that greater than the $4bn they entered BK with?) |
Originally Posted by elitetraveler
(Post 18483361)
What you are saying is factually incorrect. As with your lack of knowledge that AA is on record about needing outside funding, here is some background:
The DL/NW merger followed DL's decision not to merge with US but the BoDs decision that they wanted to pursue merger options, specifically with NW. That was the primary reason they brought in Anderson and why Whitehurst, the COO who wanted to remain independent left. http://www.usatoday.com/travel/fligh...elta-coo_N.htm UA had a dance with US to make sure CO came to the alter. http://www.marketwatch.com/story/sha...alk-2010-04-08 Also your contention that AA management is firmly in control and can decide not to have a merger in 11 seems wrong according to this Bloomberg piece: http://www.bloomberg.com/news/2012-0...iser-says.html "David Resnick, chairman of global financing advisory at Rothschild Inc., was asked yesterday at a court hearing whether a merger would be considered before exiting bankruptcy. He said it’s likely because American is obliged to get the highest value for stakeholders." As another poster pointed out, AA already made a major misstep on the pension issue caving at a cost of over $1 billion and gaining what? Yes, AA's management is FIRMLY in control of the company. Once again, NO, NONE, ZERO, airline has ever been taken over while in chapter 11. What makes you think this will be the first given AA has at least twice as much cash as its competitors who employed chapter 11? Don't just rely on what is in the media.....who produces news items off of press releases. AA's exclusive negotiating period runs thru the end of September. The Bankruptcy court will make a ruling by early June. If the unions CBA is terminated, as has been in the past with previous airlines and other companies, game, set match! Advantage: AA. By the way, if I am not mistaken, labor is 0-34 in the last 34 bankruptcy 1113 cases (rejection of CBAs). As for Resnick's comments, please understand, AA (or any company going thru this process) has to keep all options open and willing to address them to address shareholder/stakeholder's claims/value. That is part of the process. However, at the end of the day, the CC and judge will determine the outcome of AA moving forward. I recommend you follow the court proceedings not filtered thru the media. Once again, AA is firmly in control. If you don;t believe me, just look at Parker's comments how he "hope to reach a consensual agreement with AA's management." |
Originally Posted by FWAAA
(Post 18485587)
OK, so the "tremendous" influence held by the PBGC has nothing to do with the Railroad Labor Act. Your earlier statement made me think I'd missed something in the RLA.
Specifically, in what way is AA's decision to not terminate the pensions "already paying dividends?" I understand the 1113 process. What I'm looking for is an explanation of the ways in which freezing the pensions instead of terminating them has already helped AA. That's a lot of words without any specifics. You may not have expected AA's unions' endorsement of Parker's hoped-for hostile takeover, but it wasn't a real surprise for those who have long followed AA. Because the pilot pension permits retirees to withdraw their defined benefit ("A plan") as a lump sum upon retirement, not terminating the plan (but instead merely freezing it) will result in a massive cash drain on the plan that will likely prove unsustainable. Delta's pilot plan had the same provision and DL was forced to terminate the plan when it became apparent that it would not be able to fund the expected early retirements had the lump sum option remained. Last year, about 500 AA pilots retired early and withdrew, on average, about $1.3 million from their retirement plan. Accordingly, the plan is severely underfunded. Sure, AA announced that it would seek additional equity to support freezing instead of termination, but that's a stretch. You mean "unsecured claim," right? AA's unsecured creditors' claims will likely be satisfied by a distribution of new stock. The value of that new stock will depend almost entirely on the expected profitability of AMR, and that expected profitability will depend on the reductions in expenses and the debts/liabilities/obligations that are discharged in bankruptcy. The further AA can trim down those numbers, the more valuable the new stock will be. If AA can walk away from billions of dollars in pension obligations by terminating the pensions, all creditors will benefit despite the PBGC's much larger claim. Worrying about the percentage of new stock received by the PBGC is a red herring. This is all about negotiation. AA not terminating its pensions was a strategic move that helps to get the PBGC, at the very least, neutral. As I previously said, the PBGC will not want to see US assume control of AA having already dumped its pension obligations onto the U.S. taxpayers. The new combined airline will be the world's largest, i.e., too big to fail!! US has already done it twice in the past 8 yeara and will not get a third opportunity. Too much risk for the taxpayers. After the huge bank/financial institutions meltdown (bailout), the environment is much different than it was pre 2008. And the Members of the CC realize that too. |
Originally Posted by emma dog
(Post 18486349)
That's easy:
The 1113 is a legal process. Everything is a "negotiation" for all parties. The unions concerns, rightly so, is there is a strong possibility their cbas will be terminated. That's a chance they do not want, nor can afford to, take. |
Originally Posted by george 3
(Post 18493142)
In other news obtained from various sources, AMR posted an $807 million loss for March, however $856mm is on special items related to reorganization - $15mm spent on professional fees and $841mm on aircraft financing do-overs and lease rejections. Ex special items it made $49mm for the month and ended up with $4.8bn in cash (isn't that greater than the $4bn they entered BK with?)
|
Originally Posted by elitetraveler
(Post 18482139)
Actually, Bob Crandall recently said in an interview the opposite. He said in hindsight AA should have gone 11 around the same time as UA. He said it has been a costly wait as AA has had to retreat from numerous important markets/routes and curtail expansion because of its current cost structure.
Suggest you give this a watch: http://www.charlierose.com/view/interview/12228 Sell all assets, dehub several cities, shrink everywhere until they have the same cost but less income to support ever increasing fixed costs and ongoing future obligations like pilots retiring and taking lump sums. Even now, the pilots pensions should be terminated. That would guarantee others pensions freeze as a workable solution. UA went bankrupt twice and reorganized. In the first the pilots bought it out and then they went bust as well, paying their own salaries. |
Originally Posted by edwards183
(Post 18483683)
Remember, if they would have terminated the pensions, the PBGC would have just ended up with much more stock in the post chp 11 entity since thier secured claim would have been higher.
PBGC can only make money then is AA makes money. So either AA pays pilots more and loses money. Or they pay pilots less, gives currently worthless stock to PBGC and may make some money long term for everyone.
Originally Posted by FWAAA
(Post 18485587)
Because the pilot pension permits retirees to withdraw their defined benefit ("A plan") as a lump sum upon retirement, not terminating the plan (but instead merely freezing it) will result in a massive cash drain on the plan that will likely prove unsustainable. Delta's pilot plan had the same provision and DL was forced to terminate the plan when it became apparent that it would not be able to fund the expected early retirements had the lump sum option remained. Last year, about 500 AA pilots retired early and withdrew, on average, about $1.3 million from their retirement plan. Accordingly, the plan is severely underfunded. Sure, AA announced that it would seek additional equity to support freezing instead of termination, but that's a stretch.
You mean "unsecured claim," right? AA's unsecured creditors' claims will likely be satisfied by a distribution of new stock. The value of that new stock will depend almost entirely on the expected profitability of AMR, and that expected profitability will depend on the reductions in expenses and the debts/liabilities/obligations that are discharged in bankruptcy. The further AA can trim down those numbers, the more valuable the new stock will be. If AA can walk away from billions of dollars in pension obligations by terminating the pensions, all creditors will benefit despite the PBGC's much larger claim. Worrying about the percentage of new stock received by the PBGC is a red herring. AA is going to ask people to give it money to help people walk away with $1.3M each, after losing 650M in CASH over past year? |
Originally Posted by edwards183
(Post 18485957)
As to red herrings, I will answer with another one. Why does everyone think it's a good idea for a company to be able to unload debts that it incurred on an agency that eventually the taxpayers are on the hook of bailing out.
|
Originally Posted by LAXJFKesq
(Post 18495723)
Yes, AA's management is FIRMLY in control of the company. Once again, NO, NONE, ZERO, airline has ever been taken over while in chapter 11. What makes you think this will be the first given AA has at least twice as much cash as its competitors who employed chapter 11?
…. As for Resnick's comments, please understand, AA (or any company going thru this process) has to keep all options open and willing to address them to address shareholder/stakeholder's claims/value. That is part of the process. However, at the end of the day, the CC and judge will determine the outcome of AA moving forward. I recommend you follow the court proceedings not filtered thru the media. Once again, AA is firmly in control. If you don;t believe me, just look at Parker's comments how he "hope to reach a consensual agreement with AA's management." Also, I didn't discuss the merger 5,6, 7 years ago - what I stated is what Crandall said - that AA should have gone 11 when UA did. On a separate note, that would have enable AA to have merged with NW to solve their Pacific problem. |
Enough of your untruths.
Originally Posted by LAXJFKesq
(Post 18495723)
Once again, NO, NONE, ZERO, airline has ever been taken over while in chapter 11.
Originally Posted by LAXJFKesq
(Post 18480481)
Ok. Agree and disagree. Agree with the first part of your post. I disagree with Parker understanding the game. He must do this. It is his last and only chance for US to survive. He must be the aggressor because he knows that if AA emerges from chapter 11 US is not the only option for AA; and if AA decides to pursue a merger it will be on its terms not US. Time is running out for Parker. This is his 4th time walking down the hostile takeover/merger road.
Originally Posted by LAXJFKesq
(Post 18479846)
1. While Parker was able to get AA's 3 unions to agree to "non binding" agreements in 3 weeks, why has Parker not been able to get his own unions to agree to new labor contracts 7 years after US/AW merger?
2. How does Parker plan to integrate AA's 3 larger unions with US since he has been unable to do so with US's smaller unions 7 years after the US/AW merger? |
Originally Posted by cedric
(Post 18497457)
In other words, there is no downside for US to keep separate union agreements.
|
| All times are GMT -6. The time now is 8:56 am. |
This site is owned, operated, and maintained by MH Sub I, LLC dba Internet Brands. Copyright © 2024 MH Sub I, LLC dba Internet Brands. All rights reserved. Designated trademarks are the property of their respective owners.