WhatsInYourBackpack

new hires = blending down avg labor costs

=more operating income

spin88

Actual facts <redacted by moderator>, but here are a few.... July 2013...

AA's operating revenues were up $153M ($129m was AA mainline passenger revenue). Wages fell by ($74M), but other expenses increased, so that the total expenses only fell by ($19M). The profit increased by $172M, so nearly all of it was extra revenue.

The fall in costs is expected in a BKR, extra revenue is not.

They would not require any clearance. BUT, and its an important difference, the airlines could not coordinate fares or scheduling. They are still competitors, and any effort (absent getting special clearance from DOJ and DOT) to coordinate fares, scheduled, etc, would be an anti-trust violation.

I do expect B6 to further code share with AA once this merger is killed off on or around December 13, 2013.

I don't know the details, but the airlines don't pay the costs, the airport authority pays the costs with the airline chipping in something, but no where near the entire costs. E.g. DL is renovating its LAX facilities, only like 10% of the cost is being paid by DL itself.

DOJs concern is both route specific and also the systematic issues you discuss (in this case US needing to compete for business on price). A B6 merger would not likely present the "competition on connection" problem, but it would present the traditional dominance at certain airports. The difference is that a AA/B6 merger might be facilitated by giving up gates/slots, but given the combined airlines presence at BOS and JFK, and the direct competition for Caribbean/San Juan markets its hard for me to see OKing a merger.

Clearly a different administration could have a different view. AA/AS (or DL/AS) are less of an issue as combining their market share does not likely restrain competition at any location, and there is not much head to head competition on routes that others don't fly.

<redacted by moderator>

spin88

well since the pilots want to chase Tom Horton out at AA, and Parker will not get the job, maybe bring Frank out of retirement? Bet our pilot friend would support that.

FWAAA

This answer is highly simplified, but here goes:

The airport authority sells tax-free bonds sufficient to pay the construction costs; the airline signs a long-term lease; the rent is designed to pay the debt service on the bonds. As they're tax-free bonds, the interest rate is very low.

I assume that US is leasing space from AA, probably on a short-term basis (anticipating that the merger would be approved). When the plug is pulled on the merger, US may find itself homeless at JFK.

tom911

So in a chapter 7 bankruptcy, the Port Authority could take a serious credit hit if they don't find a new tenant to produce revenue to pay off those bonds? Sounds like they're invested in AA to the extent they need to be viable to produce that lease revenue to pay the bonds.

r415

Kind of smacks of being desperate to me. Typically, attorneys resort to those types of arguments when they are grasping at straws and can't come up with anything better (or know they're probably going to lose).

FWAAA

Exactly. Or even absent a Ch 7 filing, look what happens when a hub is shut down. PIT built a huge new shopping mall/airport to the specifications of USAir. And then, before it was paid off, US filed for bankruptcy twice and (AFAIK) got out from under much of the PIT lease burden. And today much of the terminal sits vacant, like an abandoned shopping mall on the wrong side of town.

STL is another example. AA rejected most of the STL leases as one of the first accomplishments of its bankruptcy. Fortunately for AA, other airlines were willing to take over its leaseholds at SJC, BNA and RDU.

Early in the AA bankruptcy, AA's bankruptcy lawyers were discussing the possibility that AA could keep the leasehold interests at JFK and MIA (and perhaps other hubs) but wiggle out from under the huge tax-free bond debt. And then renegotiate the rent downward. I don't think that went anywhere.

WhatsInYourBackpack

+1

2013 JPM Aviation, Transports, & Defense Conference
Barger made it very clear that he wished to deepen the relationship with AA.

http://www.businessweek.com/ap/2013-...-with-american



EK had also made it clear they wanted to do something with AA. EK = dumping a TON of potential connecting traffic into AA hubs giving AA some bodies to fill seats on organic growth.

Gardyloo

It wasn't the PNYNJ that issued the conduit bonds, it was the NYC Industrial Development Agency.

AA has already worked out the "what if" scenarios with the Bankruptcy Court, other secured and unsecured creditors, and the bondholders. Read the Emma filing from March (from Mellon the trustee): http://emma.msrb.org/ER657281-ER509811-.pdf

Superguy

Pilots know everything about how to run an airline. After all they fly the planes.

They also know a lot about antitrust law too ...

HNL

That's because they stayed at a Holiday Inn Express on the last layover.

Spiff

No wonder some of them are cranky.

Superguy

LOL!!! ^^^^

WhatsInYourBackpack

Must have run out of the cinnamon buns.

FWAAA

Here is a document published by the AA pilots containing merger/antitrust talking points:

https://public.alliedpilots.org/APA/...=1042&mid=2085

Basically, the APA has asked its membership to "go forth and spread the gospel" and I suspect that we'll see more single-issue posters doing just that.